10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to        

Commission file number: 0-13063 

SCIENTIFIC GAMES CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	81-0422894
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

6601 Bermuda Road, Las Vegas, Nevada 89119

(Address of principal executive offices)

(Zip Code) 

(702) 897-7150

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 par value	SGMS	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The registrant has the following number of shares outstanding of each of the registrant’s classes of common stock as of July 30, 2019:

Common Stock: 93,143,095

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL INFORMATION

AND OTHER INFORMATION

THREE AND SIX MONTHS ENDED JUNE 30, 2019

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	7
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018	7
	Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June, 30, 2019 and 2018	8
	Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	9
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

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Glossary of Terms
The following terms or acronyms used in this Quarterly Report on Form 10-Q are defined below:
Term or Acronym	Definition
2018 10-K	2018 Annual Report on Form 10-K filed with the SEC on February 28, 2019
2020 Notes	6.250% senior subordinated notes due 2020 issued by SGI
2021 Notes	6.625% senior subordinated notes due 2021 issued by SGI
2022 Secured Notes	7.000% senior secured notes due 2022 issued by SGI
2022 Unsecured Notes	10.000% senior unsecured notes due 2022 issued by SGI
2025 Secured Notes	5.000% senior secured notes due 2025 issued by SGI
2026 Secured Euro Notes	3.375% senior secured notes due 2026 issued by SGI
2026 Unsecured Euro Notes	5.500% senior unsecured notes due 2026 issued by SGI
2026 Unsecured Notes	8.250% senior unsecured notes due 2026 issued by SGI
AEBITDA	Adjusted EBITDA, our performance measure of profit or loss for our business segments (see Note 3)
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
B2C	business to consumer model
D&A	depreciation, amortization and impairments (excluding goodwill)
FASB	Financial Accounting Standards Board
Guarantor Subsidiaries	substantially all of SGC’s 100%-owned U.S. subsidiaries other than SGC’s 82% stake in SciPlay
LNS	Lotterie Nazionali S.r.l.
Non-Guarantor Subsidiaries	SGC’s U.S. subsidiaries that are not Guarantor Subsidiaries and SGC’s foreign subsidiaries
Note	a note in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, unless otherwise indicated
Participation	with respect to our Gaming business, refers to gaming machines provided to customers through service or leasing arrangements in which we earn revenues and are paid based on: (1) a percentage of the amount wagered less payouts; (2) fixed daily-fees; (3) a percentage of the amount wagered; or (4) a combination of (2) and (3), and with respect to our Lottery business, refers to a contract or arrangement in which we earn revenues and are paid based on a percentage of retail sales
POS	percentage of retail sales
PTG	proprietary table games
R&D	research and development
RFP	request for proposal
RMG	real-money gaming
RSU	restricted stock unit
SciPlay	SciPlay Corporation, formerly referred to as our Social business segment
SEC	Securities and Exchange Commission
Secured Notes	refers to the 2022 Secured Notes, 2025 Secured Notes, and 2026 Secured Euro Notes, collectively
SG&A	selling, general and administrative
SGC	Scientific Games Corporation
SGI	Scientific Games International, Inc., a wholly-owned subsidiary of SGC
Shufflers	various models of automatic card shufflers, deck checkers and roulette chip sorters
Subordinated Notes	refers to the 2020 Notes and 2021 Notes, collectively
Unsecured Notes	refers to the 2022 Unsecured Notes, 2026 Unsecured Euro Notes and 2026 Unsecured Notes, collectively
U.S. GAAP	accounting principles generally accepted in the U.S.
VGT	video gaming terminal
VLT	video lottery terminal

Intellectual Property Rights 

All ® notices signify marks registered in the United States. © 2019 Scientific Games Corporation. All Rights Reserved.

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FORWARD-LOOKING STATEMENTS

Throughout this Quarterly Report on Form 10-Q, we make “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “target,” “should,” “could,” “potential,” “opportunity,” “goal” or similar terminology. The forward-looking statements contained in this Quarterly Report on Form 10-Q are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These statements are based upon management’s current expectations, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other factors, including, among other things:

• competition;

• U.S. and international economic and industry conditions;

• slow growth of new gaming jurisdictions, slow addition of casinos in existing jurisdictions and declines in the replacement cycle of gaming machines;

• ownership changes and consolidation in the gaming industry;

• opposition to legalized gaming or the expansion thereof and potential restrictions on internet wagering;

• inability to adapt to, and offer products that keep pace with, evolving technology, including any failure of our investment of significant resources in our R&D efforts;

• inability to develop successful products and services and capitalize on trends and changes in our industries, including the expansion of internet and other forms of interactive gaming;

• laws and government regulations, both foreign and domestic, including those relating to gaming, data privacy and security, including with respect to the collection, storage, use, transmission and protection of personal information and other consumer data, and environmental laws, and those laws and regulations that affect companies conducting business on the internet, including online gambling;

• the continuing evolution of the scope of data privacy and security regulations, and our belief that the adoption of increasingly restrictive regulations in this area is likely within the U.S. and other jurisdictions;

• significant opposition in some jurisdictions to interactive social gaming, including social casinos and how such opposition could lead these jurisdictions to adopt legislation or impose a regulatory framework to govern interactive social gaming or social casinos specifically, and how this could result in a prohibition on interactive social gaming or social casinos altogether, restrict our ability to advertise our games, or substantially increase our costs to comply with these regulations;

• legislative interpretation and enforcement, regulatory perception and regulatory risks with respect to gaming, especially internet wagering, social gaming and sports wagering;

• reliance on technological blocking systems;

• expectations of shift to regulated online gaming or sports wagering;

• expectations of growth in total consumer spending on social casino gaming;

• SciPlay’s dependence on certain key providers;

• inability to win, retain or renew, or unfavorable revisions of, existing contracts, and the inability to enter into new contracts;

• protection of our intellectual property, inability to license third-party intellectual property and the intellectual property rights of others;

• security and integrity of our products and systems;

• reliance on or failures in information technology and other systems;

• security breaches and cyber-attacks, challenges or disruptions relating to the implementation of a new global enterprise resource planning system;

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• failure to maintain adequate internal control over financial reporting;

• natural events that disrupt our operations or those of our customers, suppliers or regulators;

• inability to benefit from, and risks associated with, strategic equity investments and relationships;

• risks related to the initial public offering of a minority interest in our Social gaming business via the SciPlay initial public offering, including the possibility that the anticipated benefits of the initial public offering are not realized;

• incurrence of restructuring costs;

• implementation of complex new accounting standards;

• changes in estimates or judgments related to our impairment analysis of goodwill or other intangible assets;

• changes in demand for our products;

• fluctuations in our results due to seasonality and other factors;

• dependence on suppliers and manufacturers;

• risks relating to foreign operations, including anti-corruption laws, fluctuations in currency rates, restrictions on the payment of dividends from earnings, restrictions on the import of products and financial instability, including the potential impact to our business resulting from the considerable uncertainty around the U.K.’s withdrawal from the European Union (“EU”) and the possibility of the British parliament’s failure to approve the U.K.’s withdrawal from the EU, resulting in a “hard Brexit” or “no deal Brexit”;

• possibility that the renewal of LNS’ concession to operate the Italian instant games lottery is not finalized (including as the result of a protest or any right of appeal on a court ruling on a protest);

• the impact of the new U.K. legislation approving the reduction of fixed-odds betting terminals maximum stakes limit;

• changes in tax laws or tax rulings, or the examination of our tax positions;

• difficulty predicting what impact, if any, new tariffs imposed by and other trade actions taken by the U.S. and foreign jurisdictions could have on our business;

• dependence on key employees;

• litigation and other liabilities relating to our business, including litigation and liabilities relating to our contracts and licenses, our products and systems, our employees (including labor disputes), intellectual property, environmental laws and our strategic relationships;

• level of our indebtedness, higher interest rates, availability or adequacy of cash flows and liquidity to satisfy indebtedness, other obligations or future cash needs;

• inability to reduce or refinance our indebtedness;

• restrictions and covenants in debt agreements, including those that could result in acceleration of the maturity of our indebtedness;

• influence of certain stockholders, including decisions that may conflict with the interests of other stockholders; and

• stock price volatility.

Additional information regarding risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated in forward-looking statements is included from time to time in our filings with the SEC, including under Part I, Item 1A “Risk Factors” in our 2018 10-K. Forward-looking statements speak only as of the date they are made and, except for our ongoing obligations under the U.S. federal securities laws, we undertake no and expressly disclaim any obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

You should also note that this Quarterly Report on Form 10-Q may contain references to industry market data and certain industry forecasts. Industry market data and industry forecasts are obtained from publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. Although we

5

believe industry information to be accurate, it is not independently verified by us and we do not make any representation as to the accuracy of that information. In general, we believe there is less publicly available information concerning the international gaming, lottery, social and digital gaming industries than the same industries in the U.S.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenue:
Services	$	457		$	438		$	916		$	876
Product sales	238			257			476			481
Instant products	150			150			290			300
Total revenue	845			845			1,682			1,657
Operating expenses:
Cost of services(1)	135			124			268			246
Cost of product sales(1)	111			121			218			226
Cost of instant products(1)	75			71			142			141
Selling, general and administrative	174			174			360			346
Research and development	46			49			95			103
Depreciation, amortization and impairments	170			173			335			361
Restructuring and other	6			34			13			86
Operating income	128			99			251			148
Other (expense) income:
Interest expense	(147		)	(146		)	(301		)	(301		)
Earnings from equity investments	7			5			13			12
Loss on debt financing transactions	(60		)	—			(60		)	(93		)
(Loss) gain on remeasurement of debt	(3		)	34			2			33
Other income (expense), net	7			2			7			(1		)
Total other expense, net	(196		)	(105		)	(339		)	(350		)
Net loss before income taxes	(68		)	(6		)	(88		)	(202		)
Income tax expense	(7		)	—			(11		)	(6		)
Net loss	(75		)	(6		)	(99		)	(208		)
Less: Net income attributable to noncontrolling interest	2			—			2			—
Net loss attributable to SGC	$	(77	)	$	(6	)	$	(101	)	$	(208	)
Basic and diluted net loss attributable to SGC per share:
Basic	$	(0.83	)	$	(0.06	)	$	(1.09	)	$	(2.29	)
Diluted	$	(0.83	)	$	(0.06	)	$	(1.09	)	$	(2.29	)
Weighted average number of shares used in per share calculations:
Basic shares	93			91			93			91
Diluted shares	93			91			93			91
(1) Excludes D&A.
See accompanying notes to condensed consolidated financial statements.

7

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in millions)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net loss	$	(75	)	$	(6	)	$	(99	)	$	(208	)
Other comprehensive loss:
Foreign currency translation (loss) gain, net of tax	(39		)	(88		)	16			(37		)
Pension and post-retirement (loss) gain, net of tax	(1		)	1			—			—
Derivative financial instruments unrealized (loss) gain, net of tax	(11		)	4			(16		)	6
Total comprehensive loss	(126		)	(89		)	(99		)	(239		)
Less: comprehensive income attributable to noncontrolling interest	2			—			2			—
Comprehensive loss attributable to SGC	$	(128	)	$	(89	)	$	(101	)	$	(239	)

8

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except par value)

	June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	369		$	168
Restricted cash	44			39
Accounts receivable, net	616			599
Notes receivable, net	120			114
Inventories	238			216
Prepaid expenses, deposits and other current assets	198			233
Total current assets	1,585			1,369
Non-current assets:
Restricted cash	12			13
Notes receivable, net	42			40
Property and equipment, net	532			547
Operating lease right-of-use assets	113			—
Goodwill	3,279			3,280
Intangible assets, net	1,660			1,809
Software, net	265			285
Equity investments	273			298
Other assets	171			77
Total assets	$	7,932		$	7,718
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt	$	45		$	45
Accounts payable	201			225
Accrued liabilities	487			477
Total current liabilities	733			747
Deferred income taxes	108			108
Operating lease liabilities	95			—
Other long-term liabilities	312			334
Long-term debt, excluding current portion	8,802			8,992
Total liabilities	10,050			10,181
Commitments and contingencies (see Note 16)
Stockholders’ deficit:
Common stock, par value $0.001 per share: 199 shares authorized; 110 and 109 shares issued and 93 and 92 shares outstanding, respectively	1			1
Additional paid-in capital	1,187			835
Accumulated loss	(2,925		)	(2,824		)
Treasury stock, at cost, 17 shares	(175		)	(175		)
Accumulated other comprehensive loss	(300		)	(300		)
Total SGC stockholders’ deficit	(2,212		)	(2,463		)
Noncontrolling interest	94			—
Total stockholders’ deficit	(2,118		)	(2,463		)
Total liabilities and stockholders’ deficit	$	7,932		$	7,718
See accompanying notes to condensed consolidated financial statements.

9

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)

	Six Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(99	)	$	(208	)
Adjustments to reconcile net loss to cash provided by operating activities	440			482
Changes in working capital accounts, net of effects of acquisitions	(86		)	(138		)
Changes in deferred income taxes and other	7			(4		)
Net cash provided by operating activities	262			132
Cash flows from investing activities:
Capital expenditures	(132		)	(200		)
Acquisitions of businesses and assets, net of cash acquired	—			(274		)
Distributions of capital from equity investments	18			23
Additions to equity method investments	(1		)	(75		)
Net cash used in investing activities	(115		)	(526		)
Cash flows from financing activities:
Borrowings under revolving credit facility	40			185
Repayments under revolving credit facility	(320		)	(380		)
Proceeds from issuance of senior notes and term loans	1,100			2,512
Repayment of senior notes and term loans (inclusive of redemption premium)	(1,050		)	(2,210		)
Repayment of assumed NYX debt	—			(288		)
Payments on long-term debt	(23		)	(14		)
Payments of debt issuance and deferred financing costs	(15		)	(39		)
Payments on license obligations	(13		)	(14		)
Sale of future revenue	11			—
Net proceeds from the sale of SciPlay common stock	342			—
Payments of deferred SciPlay common stock offering costs	(8		)	—
Net redemptions of common stock under stock-based compensation plans and other	(7		)	(21		)
Net cash provided by (used in) financing activities	57			(269		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1			(3		)
Increase (decrease) in cash, cash equivalents and restricted cash	205			(666		)
Cash, cash equivalents and restricted cash, beginning of period	220			834
Cash, cash equivalents and restricted cash, end of period	$	425		$	168
Supplemental cash flow information:
Cash paid for interest	$	270		$	366
Income taxes paid	18			15
Distributed earnings from equity investments	22			19
Supplemental non-cash transactions:
Non-cash rollover and refinancing of Term loans	$	—		$	3,275
Non-cash interest expense	13			12
NYX non-cash consideration transferred (including 2017 acquisition of ordinary shares)	—			93
See accompanying notes to condensed consolidated financial statements.

10

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, amounts in USD, table amounts in millions, except per share amounts)

(1) Description of the Business and Summary of Significant Accounting Policies

Description of the Business

We are a leading developer of technology-based products and services and associated content for the worldwide gaming, lottery, social and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino-management systems and table game products and services to licensed gaming entities; providing instant and draw-based lottery products, lottery systems and lottery content and services to lottery operators; providing social casino solutions to retail consumers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We report our operations in four business segments—Gaming, Lottery, SciPlay (formerly referred to as our Social business segment) and Digital.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The accompanying condensed consolidated financial statements include the accounts of SGC and those subsidiaries in which we have a controlling financial interest. Investments in other entities in which we do not have a controlling financial interest but we exert significant influence are accounted for in our condensed consolidated financial statements using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of SGC and its management, we have made all adjustments necessary to present fairly our consolidated financial position, results of operations and comprehensive income (loss) and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2018 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.

SciPlay Initial Public Offering and Noncontrolling Interest

On May 7, 2019, SciPlay completed an initial public offering (“IPO”) for an 18.0% minority interest in our Social gaming business, after giving effect to the underwriters’ partial exercise of their over-allotment option on June 4, 2019. SciPlay has two classes of common stock - Class A common stock, which is traded on The NASDAQ Global Select Market under the symbol “SCPL,” and Class B common stock. On all matters submitted to a vote of SciPlay stockholders, Class B common stock entitles SGC to ten votes per share (for so long as the number of shares of SciPlay common stock beneficially owned by SGC represents at least 10% of SciPlay’s outstanding shares of common stock and, thereafter, one vote per share), and SciPlay Class A common stock entitles its owners to one vote per share. As of June 30, 2019, SGC owned all of the outstanding Class B common stock, which represents approximately 82.0% of SciPlay’s total outstanding shares of common stock and approximately 97.9% of the combined voting power of both classes of SciPlay’s outstanding common stock. Accordingly, SGC continues to control shares representing a majority of the combined voting power in SciPlay and continues to have a controlling financial interest in and consolidate SciPlay, (formerly referred to as our Social business segment) subsequent to the IPO.

The corporate structure of the above transaction is commonly referred to as an “Up‑C” structure, which is often used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up‑C structure allows us to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following the IPO. We continue to maintain a full valuation allowance on certain of our U.S. net deferred tax assets, and we continue to monitor and assess positive and negative evidence with respect to our ability to realize our deferred tax assets.

In connection with the SciPlay IPO we also entered into the following transactions:

• A tax receivable agreement (“TRA”), which provides for the payment by SciPlay to SGC of 85% of the amount of tax benefits, if any, that SciPlay actually realizes (or in some circumstances is deemed to realize) as a result of (i) increases in the tax basis of assets of SciPlay Parent Company, LLC (“SciPlay Parent LLC”) (a) in connection with the SciPlay IPO, (b) resulting from any redemptions or exchanges of membership interests of SciPlay Parent LLC pursuant to the SciPlay Parent LLC Operating Agreement or (c) resulting from certain distributions (or deemed distributions) by SciPlay Parent LLC and (ii) certain other tax benefits related to SciPlay’s making of payments under the TRA. 

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• An Intercompany Services Agreement, under which SGC provides to SciPlay certain corporate level general and administrative services, including but not limited to, finance, corporate development, human resources, legal (which could include liability related to litigation awards related to SciPlay), information technology and rental fees for shared assets. These expenses will be charged to SciPlay and settled in cash.

• An intellectual property license agreement (“IP License Agreement”), pursuant to which SciPlay acquired the following licenses from a restricted subsidiary of SGC for a one-time payment of $255 million: (i) an exclusive (subject to certain limited exceptions), perpetual, non-royalty bearing license to use intellectual property created or acquired by Bally Gaming, Inc. (“Bally Gaming”) or its affiliates on or before the third anniversary of the date of the IP License Agreement (the date of the IP License Agreement, the “Effective Date”), in any of the Covered Games (defined as any of SciPlay’s currently available or future social games that are developed for mobile platforms, social media platforms, internet platforms or other interactive platforms and distributed solely via digital delivery); (ii) an exclusive (subject to certain limited exceptions and payment of royalties owed to third-party licensors for SciPlay’s use of third-party licensed property) license to use third-party intellectual property licensed to Bally Gaming or its affiliates on or before the third anniversary of the Effective Date, to the extent permitted to be sublicensed to SciPlay, in any of the Covered Games; (iii) a non-exclusive, perpetual, non-royalty bearing license to use intellectual property created or acquired by Bally Gaming or its affiliates after the third anniversary of the Effective Date, but only in SciPlay’s currently available games; and (iv) a non-exclusive license to use third-party intellectual property licensed to Bally Gaming or its affiliates after the third anniversary of the Effective Date, to the extent permitted to be sublicensed to SciPlay, but only in SciPlay’s currently available games.

As a result of the IP License Agreement described above, SciPlay is no longer required to pay to Bally Gaming future royalties and or fees for use of intellectual property owned by Bally Gaming or its affiliates for SciPlay’s currently available games. Accordingly, and commencing with the effectiveness of the IP License Agreement as of May 7, 2019, our Gaming business segment AEBITDA no longer benefited from these charges, while our SciPlay business segment AEBITDA increased proportionately. The total amount of such IP charges for the three and six months ended June 30, 2019 were $3 million and $10 million, respectively, and for the three and six months ended June 30, 2018 were $6 million and $13 million, respectively. The total amount of such IP charges for the years ended December 31, 2018 and 2017 were $26 million and $24 million, respectively.

• SciPlay Holding Company, LLC (“SciPlay Holding”), a subsidiary of SciPlay, entered into a $150 million revolving credit agreement (the “SciPlay Revolver”) that matures in May 2024 (see Note 11).

As a result of these transactions, we received $312 million in net proceeds from the offering (net of $30 million used by SciPlay to pay the Offering fees and balance retained for general corporate purposes), which enables us to make substantial payments to reduce our debt.

The noncontrolling interest share of equity in SciPlay is reflected as a component of the noncontrolling interest in the accompanying consolidated balance sheets and was $94 million as of June 30, 2019.

Significant Accounting Policies

There have been no changes to our significant accounting policies described within the Notes of our 2018 10-K other than adoption of ASC 842 described in Note 15.

Computation of Basic and Diluted Net Loss Per Share

Basic and diluted net loss per share were the same for all periods presented as all common stock equivalents would be anti-dilutive. We excluded 2 million of stock options from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2019 and 3 million of stock options from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2018. We excluded 3 million of RSUs from the calculation of diluted weighted-average common shares outstanding for both the three and six months ended June 30, 2019 and 2018.

New Accounting Guidance - Recently Adopted

The FASB issued ASU No. 2016-02, Leases (Topic 842) in 2016. ASU 2016-02 combined with all subsequent amendments (collectively, “ASC 842”) requires balance sheet recognition for all leases with a lease term greater than one year to be recorded as a lease liability (on a discounted basis) with a corresponding right-of-use asset. This guidance also expands the required quantitative and qualitative disclosures for lease arrangements and gives rise to other changes impacting certain

12

aspects of lessee and lessor accounting. We adopted ASC 842 as of January 1, 2019 using the optional transition method provided by ASU 2018-11, and applied both the lessee package of practical expedients and the available lessor practical expedients. During the first quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees and lessors from having to provide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases standard. We have provided the related transition disclosures as of the beginning of 2019 in accordance with ASU 2019-1. See our 2018 10-K Note 1 for the impact on our consolidated financial statements and Note 15 in this Quarterly Report for our lease accounting policy and the impact of our adoption of ASC 842.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard allows companies to make an election to reclassify from Accumulated Other Comprehensive Income (AOCI) to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. This ASU is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The amendments in this updated guidance should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. corporate federal income tax rate in the Tax Act is recognized. We adopted this standard effective January 1, 2019. We elected not to reclassify the income tax effects of the Tax Cuts and Jobs Act from AOCI to retained earnings. The adoption of this guidance did not have an effect on our consolidated financial statements.

New Accounting Guidance - Not Yet Adopted

The FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) in 2016. The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The new guidance will be effective for us beginning January 1, 2020. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of adopting this guidance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The new guidance will be effective for us beginning January 1, 2020, with early adoption permitted. We do not plan to early adopt this ASU, and we are currently evaluating the impact of adopting this guidance.

We do not expect that any other recently issued accounting guidance will have a significant effect on our consolidated financial statements.

(2) Revenue Recognition

The following table disaggregates revenues by type within each of our business segments:

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	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Gaming
Gaming operations	$	150	$	160	$	302	$	321
Gaming machine sales	148		168		284		313
Gaming systems	67		84		141		159
Table products	62		59		122		121
Total	$	427	$	471	$	849	$	914
Lottery
Instant products	$	150	$	150	$	290	$	300
Lottery systems	81		57		168		109
Total	$	231	$	207	$	458	$	409
SciPlay
Mobile	$	98	$	77	$	195	$	149
Web and other	20		23		41		48
Total	$	118	$	100	$	236	$	197
Digital
Sports and platform	$	26	$	20	$	56	$	46
Gaming and other	43		47		83		91
Total	$	69	$	67	$	139	$	137

The amount of rental income revenue that is outside the scope of ASC 606 was $95 million and $191 million for the three and six months ended June 30, 2019, respectively, and $69 million and $136 million for the three and six months ended June 30, 2018, respectively.

Contract Liabilities and Other Disclosures

The following table summarizes the activity in our contract liabilities for the reporting period:

	Six Months Ended June 30,
	2019
Contract liability balance, beginning of period(1)	$	97
Liabilities recognized during the period	33
Amounts recognized in revenue from beginning balance	(30		)
Contract liability balance, end of period(1)	$	100
(1) Contract liabilities are included within Accrued liabilities and Other long-term liabilities in our June 30, 2019 consolidated balance sheet.

The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on our consolidated balance sheets. Other than contracts with customers with financing arrangements exceeding 12 months, revenue recognition is generally proximal to conversion to cash, except for Lottery instant products sold under POS contracts. Revenue is recognized for such contracts upon delivery to our customers, while conversion to cash is based on the retail sale of the underlying ticket to end consumers. As a result, for such contracts revenue recognition under ASC 606 does not approximate conversion to cash. Total revenue recognized under such contracts for the three and six months ended June 30, 2019 was $26 million and $49 million, respectively, and was $24 million and $58 million for the three and six months ended June 30, 2018, respectively. The following table summarizes our receivables and contract asset balances for the periods indicated (other than contract liabilities disclosed above):

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	Receivables		Contract Assets(1)
Beginning of period balance	$	753	$	114
End of period balance, June 30, 2019	778		114
(1) Contract assets are included primarily within Prepaid expenses, deposits and other current assets in our June 30, 2019 consolidated balance sheet.

As of June 30, 2019, we did not have material unsatisfied performance obligations for contracts expected to be long-term or contracts for which we recognize revenue at an amount other than for which we have the right to invoice for goods or services delivered or performed.

(3) Business Segments

We report our operations in four business segments—Gaming, Lottery, SciPlay (formerly referred to as our Social business segment) and Digital—representing our different products and services. A detailed discussion regarding the products and services from which each reportable business segment derives its revenue is included in Notes 2 and 3 in our 2018 10-K.

In evaluating financial performance, our Chief Operating Decision Maker focuses on AEBITDA as management’s segment measure of profit or loss, which is described in Note 3 in our 2018 10-K. As a result of the IPO of a minority interest in our Social gaming business, which was completed on May 7, 2019, we now refer to our Social business segment as our SciPlay business segment, and we also changed our calculation of SciPlay business segment AEBITDA beginning with the first quarter of 2019. SciPlay business segment AEBITDA now reflects intercompany charges settled in cash for corporate services and certain royalties paid for by our SciPlay business segment to other segments or to Corporate (included in the “Unallocated and Reconciling Items” column in the tables below). Business segment information for the three and six months ended June 30, 2018 has been recast to reflect these changes. Additionally, see Note 1 for a description of the IP License Agreement executed in conjunction with the SciPlay IPO that impacts our Gaming business segment and SciPlay business segment AEBITDA commencing with the effectiveness of the IP License Agreement as of May 7, 2019. The accounting policies of our business segments are the same as those described within the Notes in our 2018 10-K. The following tables present our segment information:

	Three Months Ended June 30, 2019
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	427		$	231		$	118		$	69		$	—		$	845
AEBITDA(2)	215			103			33			12			(28		)	$	335
Reconciling items to consolidated net loss before income taxes:
D&A	(114		)	(20		)	(2		)	(19		)	(15		)	(170		)
Restructuring and other	(2		)	(1		)	(1		)	(1		)	(1		)	(6		)
EBITDA from equity investments													(18		)	(18		)
Earnings from equity investments													7			7
Interest expense													(147		)	(147		)
Loss on debt refinancing transactions													(60		)	(60		)
Loss on remeasurement of debt													(3		)	(3		)
Other income, net													4			4
Stock-based compensation													(10		)	(10		)
Net loss before income taxes																$	(68	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.
(2) Gaming AEBITDA decreased and SciPlay AEBITDA increased compared to prior periods as the IP charges are no longer being allocated to SciPlay per the IP License Agreement discussed in Note 1. The three months ended June 30, 2019 includes $3 million in intellectual property royalties paid by the SciPlay business segment, which were terminated as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the three months ended June 30, 2018 were $6 million.

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	Three Months Ended June 30, 2018
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	471		$	207		$	100		$	67		$	—		$	845
AEBITDA	236			99			23			13			(31		)	$	340
Reconciling items to consolidated net loss before income taxes:
D&A	(121		)	(14		)	(6		)	(17		)	(15		)	(173		)
Restructuring and other	(2		)	3			(1		)	(4		)	(30		)	(34		)
EBITDA from equity investments													(16		)	(16		)
Earnings from equity investments													5			5
Interest expense													(146		)	(146		)
Gain on remeasurement of debt													34			34
Other expense, net													(1		)	(1		)
Stock-based compensation													(15		)	(15		)
Net loss before income taxes																$	(6	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.

	Six Months Ended June 30, 2019
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	849		$	458		$	236		$	139		$	—		$	1,682
AEBITDA(2)	430			207			58			25			(57		)	$	663
Reconciling items to consolidated net loss before income taxes:
D&A	(226		)	(39		)	(4		)	(38		)	(28		)	(335		)
Restructuring and other	(4		)	(1		)	(2		)	(4		)	(2		)	(13		)
EBITDA from equity investments													(35		)	(35		)
Earnings from equity investments													13			13
Interest expense													(301		)	(301		)
Loss on debt refinancing transactions													(60		)	(60		)
Gain on remeasurement of debt													2			2
Other income, net													2			2
Stock-based compensation													(24		)	(24		)
Net loss before income taxes																$	(88	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.
(2) Gaming AEBITDA decreased and SciPlay AEBITDA increased compared to prior periods as the IP charges are no longer being allocated to SciPlay per the IP License Agreement discussed in Note 1. The six months ended June 30, 2019 includes $10 million in intellectual property royalties paid by the SciPlay business segment, which were terminated as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the six months ended June 30, 2018 were $13 million.

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	Six Months Ended June 30, 2018
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	914		$	409		$	197		$	137		$	—		$	1,657
AEBITDA	454			193			46			30			(63		)	$	660
Reconciling items to consolidated net loss before income taxes:
D&A	(260		)	(28		)	(13		)	(33		)	(27		)	(361		)
Restructuring and other	(3		)	2			(19		)	(10		)	(56		)	(86		)
EBITDA from equity investments													(35		)	(35		)
Earnings from equity investments													12			12
Interest expense													(301		)	(301		)
Loss on debt financing transactions													(93		)	(93		)
Gain on remeasurement of debt													33			33
Other expense, net													(7		)	(7		)
Stock-based compensation													(24		)	(24		)
Net loss before income taxes																$	(202	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.

(4) Restructuring and other

Restructuring and other includes charges or expenses attributable to: (i) employee severance; (ii) management restructuring and related costs; (iii) restructuring and integration; (iv) cost savings initiatives; (v) major litigation; and (vi) acquisition costs and other unusual items. The following table summarizes pre-tax restructuring and other costs for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Employee severance(1)	$	2	$	16	$	5	$	21
Acquisitions and related costs	—		—		—		8
Contingent consideration adjustment	2		—		2		18
Legal and related	—		10		—		26
Restructuring, integration and other	2		8		6		13
Total	$	6	$	34	$	13	$	86
(1) Includes employee severance and termination costs associated with restructuring and integration activities.

(5) Accounts and Notes Receivable and Credit Quality of Receivables

Accounts and Notes Receivable

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

	June 30, 2019			December 31, 2018
Current:
Accounts receivable	$	629		$	615
Notes receivable	143			138
Allowance for doubtful accounts and notes	(36		)	(40		)
Current accounts and notes receivable, net	$	736		$	713
Long-term:
Notes receivable, net of allowance	42			40
Total accounts and notes receivable, net	$	778		$	753

Credit Quality of Receivables

The interest rates on our outstanding receivables bearing interest ranged from 3% to 10% at June 30, 2019 and December 31, 2018.

We have certain concentrations of outstanding accounts and notes receivable in international locations that impact our assessment of the credit quality of those receivables. We monitor the macroeconomic and political environment in each of these locations in our assessment of the credit quality of our receivables. We have not identified changes in the aforementioned factors during the six months ended June 30, 2019 that require a reassessment of our receivable balances. The international locations with significant concentrations (generally deemed to be exceeding 10%) of our notes receivable are as follows:

• Mexico - Our notes receivable, net, from certain customers in Mexico at June 30, 2019 was $25 million. We collected $16 million of outstanding receivables from these customers during the six months ended June 30, 2019.

• Peru - Our notes receivable, net, from certain customers in Peru at June 30, 2019 was $13 million. We collected $4 million of outstanding receivables from these customers during the six months ended June 30, 2019.

• Argentina - Our notes receivable, net, from customers in Argentina at June 30, 2019 was $22 million denominated in USD. Our customers are required to, and have continued to, pay us in pesos at the spot exchange rate on the date of payment. We collected $9 million of outstanding receivables from customers in Argentina during the six months ended June 30, 2019.

In addition to the macroeconomic and political factors noted above, we also evaluated recent 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.

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

	June 30, 2019			Balances over 90 days past due			December 31, 2018			Balances over 90 days past due
Notes receivable:
Domestic	$	71		$	12		$	55		$	6
International	114			23			123			25
Total notes receivable	185			35			178			31
Notes receivable allowance
Domestic	(5		)	(5		)	(6		)	(6		)
International	(18		)	(18		)	(18		)	(18		)
Total notes receivable allowance	(23		)	(23		)	(24		)	(24		)
Notes receivable, net	$	162		$	12		$	154		$	7

At June 30, 2019, 7% of our total notes receivable, net, was past due by over 90 days, compared to 4% at December 31, 2018.

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We evaluate our exposure to credit loss on notes receivable on both a collective and individual basis. In addition, we evaluate such notes receivable on a geographic basis and take into account any other factors (such as general economic conditions, other macroeconomic considerations, etc.) that could impact our collectability of notes receivable individually or in the aggregate. Accordingly, notes receivable may be evaluated under multiple methodologies, and the resulting allowance is not determined based on one specific methodology taking all factors into consideration. The activity in our allowance for notes receivable for each of the six month periods ended June 30, 2019 and 2018 is as follows:

	Six Months Ended June 30,
	2019			2018
Beginning allowance for notes receivable	$	(24	)	$	(21	)
Provision	(3		)	(3		)
Charge-offs and recoveries	4			1
Ending allowance for notes receivable	$	(23	)	$	(23	)

The fair value of notes receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. As of June 30, 2019 and December 31, 2018, the fair value of notes receivable, net, approximated the carrying value due to contractual terms of notes receivable generally being under 24 months.

(6) Inventories

Inventories consisted of the following as of the dates presented below:

	June 30, 2019		December 31, 2018
Parts and work-in-process	$	146	$	131
Finished goods	92		85
Total inventories	$	238	$	216

Parts and work-in-process include parts for gaming machines, lottery terminals and instant lottery ticket materials, as well as labor and overhead costs for work-in-process associated with the manufacturing of instant lottery games and lottery terminals. Our finished goods inventory primarily consists of gaming machines for sale, instant products primarily for our Participation arrangements and our licensed branded merchandise.

(7) Property and Equipment, net    

Property and equipment, net consisted of the following:

	June 30, 2019			December 31, 2018
Land	$	20		$	15
Buildings and leasehold improvements	152			128
Gaming and lottery machinery and equipment	1,034			1,041
Furniture and fixtures	29			27
Construction in progress	21			17
Other property and equipment	251			240
Less: accumulated depreciation	(975		)	(921		)
Total property and equipment, net	$	532		$	547

Depreciation expense is excluded from Cost of services, Cost of product sales, Cost of instant products and Other operating expenses and is separately presented within D&A.

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018(1)
Depreciation expense	$	64	$	55	$	122	$	127
(1) Includes assets held for sale impairment charges of $19 million.

During the second quarter of 2019, we reclassified the assets held for sale to assets held and used at the carrying amount of $27 million (reflecting an impairment charge of approximately $9 million recorded during the second quarter of 2019) due to the assets no longer meeting assets held for sale criteria.

(8) Intangible Assets, net and Goodwill

Intangible Assets, net

The following tables present certain information regarding our intangible assets as of June 30, 2019 and December 31, 2018.

	June 30, 2019							December 31, 2018
	Gross Carrying Value		Accumulated Amortization			Net Balance		Gross Carrying Value		Accumulated Amortization			Net Balance
Amortizable intangible assets:
Customer relationships	$	1,084	$	(341	)	$	743	$	1,084	$	(299	)	$	785
Intellectual property	931		(512		)	419		931		(453		)	478
Licenses	547		(291		)	256		546		(253		)	293
Brand names	123		(65		)	58		123		(59		)	64
Trade names	107		(27		)	80		108		(23		)	85
Patents and other	24		(14		)	10		23		(13		)	10
	2,816		(1,250		)	1,566		2,815		(1,100		)	1,715
Non-amortizable intangible assets:
Trade names	96		(2		)	94		96		(2		)	94
Total intangible assets	$	2,912	$	(1,252	)	$	1,660	$	2,911	$	(1,102	)	$	1,809

 

The following reflects intangible amortization expense included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	75	$	76	$	152	$	153

Goodwill

In conjunction with integrating our recent Digital acquisitions, the implementation of ERP systems in the Digital segment and recent management changes, during the first quarter of 2019, in our Digital business segment, we reviewed our Digital operating segment in accordance with ASC 350 to determine if additional reporting units exist based on the availability of discrete financial information that is regularly reviewed by segment management. We determined that in our Digital operating segment we now have two reporting units: (1) Digital sports and platform and (2) Digital gaming and other. The change in the Digital business segment reporting units resulted in the allocation of the previous Digital reporting unit goodwill balance as follows: $230 million to the new Digital sports and platform reporting unit and $134 million to the new Digital gaming and other reporting unit, which allocation was determined based on the relative fair value approach prescribed by ASC 350. As a result of this change we now have ten reporting units: Instant Products, U.S. Lottery Systems, International Lottery Systems, SG Gaming, legacy U.K. Gaming, Casino Management Systems, Table Products, SciPlay, Digital sports and platform and Digital gaming and other.

The table below reconciles the change in the carrying value of goodwill by business segment for the period from

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December 31, 2018 to June 30, 2019.

Goodwill	Gaming		Lottery			SciPlay		Digital		Totals
Balance as of December 31, 2018	$	2,449	$	352		$	115	$	364	$	3,280
Foreign currency adjustments	—		(1		)	—		—		(1		)
Balance as of June 30, 2019	$	2,449	$	351		$	115	$	364	$	3,279

(9) Software, net

Software, net consisted of the following:

	June 30, 2019			December 31, 2018
Software	$	1,146		$	1,101
Accumulated amortization	(881		)	(816		)
Software, net	$	265		$	285

The following reflects amortization of software included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	31	$	42	$	61	$	81

(10) Equity Investments

Equity investments totaled $273 million and $298 million as of June 30, 2019 and December 31, 2018, respectively. We received distributions and dividends totaling $40 million and $42 million during the six months ended June 30, 2019 and 2018, respectively, primarily related to our LNS equity investment.

(11) Long-Term and Other Debt

2026 Unsecured Notes

On March 19, 2019, SGI issued $1,100 million in aggregate principal amount of its new 2026 Unsecured Notes at an issue price of 100.000% in a private offering. We used the net proceeds of the 2026 Unsecured Notes offering to redeem $1,000 million of our outstanding 2022 Unsecured Notes and pay accrued and unpaid interest thereon plus related premiums, fees, and costs, which redemption was completed on April 4, 2019, and paid related fees and expenses of the 2026 Unsecured Notes offering.

The 2026 Unsecured Notes were issued pursuant to an indenture dated as of March 19, 2019 (the “2026 Unsecured Notes Indenture”). SGI may redeem some or all of the 2026 Unsecured Notes at any time prior to March 15, 2022 at a redemption price equal to 100% of the principal amount of the 2026 Unsecured Notes plus accrued and unpaid interest, if any, to the date of the redemption plus a “make whole” premium. SGI may redeem some or all of the 2026 Unsecured Notes at any time on or after March 15, 2022 at the prices specified in the 2026 Unsecured Notes Indenture.

The 2026 Unsecured Notes are senior unsecured obligations of SGI, rank equally to all SGI’s existing and future senior debt and rank senior to all of SGI’s existing and future senior subordinated debt. The 2026 Unsecured Notes are guaranteed on a senior unsecured basis by SGC and all of its wholly owned U.S. subsidiaries (other than SGI, the unrestricted business entities comprising our SciPlay business segment and certain immaterial subsidiaries). The 2026 Unsecured Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

In connection with the 2026 Unsecured Notes offering, we reflected $16 million in financing costs presented primarily as a reduction to long-term debt.

SciPlay Revolver

SciPlay Holding, a subsidiary of SciPlay, entered into the SciPlay Revolver, a $150 million revolving credit agreement that matures in May 2024, by and among SciPlay Holding, as the borrower, SciPlay Parent LLC, as a guarantor, the subsidiary guarantors party thereto (which are all domestic entities that comprise our SciPlay business segment), the lenders party thereto

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and Bank of America, N.A., as administrative agent and collateral agent. The interest rate is either Adjusted LIBOR (as defined in the SciPlay Revolver) plus 2.250% (with one 0.250% leverage-based step-down to the margin and one 0.250% leverage-based step-up to the margin) or ABR (as defined in the SciPlay Revolver) plus 1.250% (with one 0.250% leverage-based step-down to the margin and one 0.250% leverage-based step-up to the margin) at the option of SciPlay Holding. SciPlay Holding is required to pay to the lenders a commitment fee of 0.500% per annum on the average daily unused portion of the revolving commitments through maturity, which fee varies based on the total net leverage ratio and is subject to a floor of 0.375%. The SciPlay Revolver provides for up to $15 million in letter of credit issuances, which requires customary issuance and administration fees, and a fronting fee of 0.125%.

The SciPlay Revolver contains covenants that, among other things, restricts SciPlay’s ability to incur additional indebtedness; incur liens; sell, transfer or dispose of property and assets; invest; make dividends or distributions or other restricted payments; and engage in affiliate transactions, with the exception of certain payments under the TRA and payments in respect of certain tax distributions and intercompany services under the SciPlay Parent LLC Operating Agreement.

In addition, the SciPlay Revolver requires that SciPlay maintain a maximum total net leverage ratio not to exceed 2.50:1.00 and maintain a minimum fixed charge coverage ratio of no less than 4.00:1.00. The SciPlay Revolver is secured by a (i) first priority pledge of the equity securities of SciPlay Holding, SciPlay Parent LLC’s restricted subsidiaries and each subsidiary guarantor party thereto and (ii) first priority security interests in, and mortgages on, substantially all tangible and intangible personal property and material fee-owned real property of SciPlay Parent LLC, SciPlay Holding and each subsidiary guarantor party thereto, in each case, subject to customary exceptions.

Outstanding Debt and Finance Leases

The following table reflects our outstanding debt:

	As of
	June 30, 2019										December 31, 2018
	Final Maturity	Rate(s)	Face value		Unamortized debt discount/premium and deferred financing costs, net			Book value			Book value
Senior Secured Credit Facilities:
Revolver	2020	variable	$	45	$	—		$	45		$	325
Term Loan B-5	2024	variable	4,122		(66		)	4,056			4,071
SciPlay Revolver	2024	variable	—		—			—			—
Senior Notes:
2025 Secured Notes(2)	2025	5.000%	1,250		(16		)	1,234			1,233
2026 Secured Euro Notes(3)	2026	3.375%	370		(5		)	365			367
2022 Unsecured Notes	2022	10.000%	1,200		(11		)	1,189			2,176
2026 Unsecured Euro Notes(3)	2026	5.500%	285		(4		)	281			282
2026 Unsecured Notes	2026	8.250%	1,100		(15		)	1,085			—
Subordinated Notes:
2020 Notes	2020	6.250%	244		(1		)	243			242
2021 Notes	2021	6.625%	341		(3		)	338			337
Finance lease obligations as of June 30, 2019 payable monthly through 2019 and other(4)	2019	3.900%	11		—			11			4
Total long-term debt outstanding			$	8,968	$	(121	)	$	8,847		$	9,037
Less: current portion of long-term debt								(45		)	(45		)
Long-term debt, excluding current portion								$	8,802		$	8,992
Fair value of debt(1)			$	9,066

22

(1) Fair value of our fixed rate and variable interest rate debt is classified within level 2 in the fair value hierarchy and has been calculated based on the quoted market prices of our securities.

(2) Includes cross-currency interest rate swap agreements that we entered into in 2018 in the amount of $460 million U.S. Dollar-denominated 2025 Secured Notes to a fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946% (see Note 16 in our 2018 10-K).

(3) We designated a portion of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the change in foreign currency exchange rates of the Euro relative to the U.S. Dollar (see Note 12 for additional information). The total change in the face value of the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes due to changes in foreign currency exchange rates since the issuance was a reduction of $58 million, of which a $3 million loss and a $2 million gain were recognized on remeasurement of debt in the Consolidated Statements of Operations for the three and six months ended June 30, 2019, respectively.

(4) Includes $10 million related to certain revenue transactions presented as debt in accordance with ASC 470.

We were in compliance with the financial covenants under all debt agreements as of June 30, 2019.

For additional information regarding the terms of our credit agreements, Secured Notes, Unsecured Notes and Subordinated Notes, see Note 16 in our 2018 10-K.

Loss on Debt Financing Transactions

The following are components of the loss on debt financing transactions resulting from debt extinguishment and modification accounting for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Repayment and cancellation of principal balance at premium	$	50	$	—	$	50	$	110
Unamortized debt (premium) discount and deferred financing costs, net	10		—		10		(30		)
Third party debt issuance fees	—		—		—		13
Total loss on debt financing transactions	$	60	$	—	$	60	$	93

(12) Fair Value Measurements

The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments, which are principally cash and cash equivalents, restricted cash, accounts receivable, other current assets, accounts payable and accrued liabilities, approximates their recorded values. Our assets and liabilities measured at fair value on a recurring basis are described below.

Derivative Financial Instruments

We record derivative financial instruments on the balance sheet at their respective fair values. As of June 30, 2019, we held the following derivative instruments that were accounted for pursuant to ASC 815:

Interest Rate Swap Contracts

We currently use interest rate swap contracts as described below to mitigate gains or losses associated with the change in expected cash flows due to fluctuations in interest rates on our variable rate debt.

In February 2018, we entered into interest rate swap contracts to hedge a portion of our interest expense associated with our variable rate debt to effectively fix the interest rate that we pay. These interest rate swap contracts are designated as cash flow hedges under ASC 815. We pay interest at a weighted-average fixed rate of 2.4418% and receive interest at a variable rate equal to one-month LIBOR. The total notional amount of interest rate swaps outstanding was $800 million as of June 30, 2019. These hedges mature in February 2022.

These hedges are highly effective in offsetting changes in our future expected cash flows due to the fluctuation in the one-month LIBOR rate associated with our variable rate debt. We qualitatively monitor the effectiveness of these hedges on a quarterly basis. As a result of the effective matching of the critical terms on our variable rate interest expense being hedged to the hedging instruments being used, we expect these hedges to remain highly effective.

All gains and losses from these hedges are recorded in Other comprehensive income (loss) until the future underlying payment transactions occur. Any realized gains or losses resulting from the hedges are recognized (together with the hedged transaction) as interest expense. We estimate the fair value of our interest rate swap contracts by discounting the future cash

23

flows of both the fixed rate and variable rate interest payments based on market yield curves. The inputs used to measure the fair value of our interest rate swap contracts are categorized as Level 2 in the fair value hierarchy as established by ASC 820.

The following table shows the gains (loss) and interest expense recognized on our interest rate swap contracts:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
(Loss) gain recorded in accumulated other comprehensive loss, net of tax	$	(11	)	$	4	$	(16	)	$	6
Interest expense recorded related to interest rate swap contracts	—			1		—			2

We do not expect to reclassify material amounts from Accumulated other comprehensive income (loss) to interest expense in the next twelve months.

The following table shows the effect of interest rate swap contracts designated as cash flow hedges on the consolidated statements of operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	Interest expense						Interest expense
Total interest expense which reflects the effects of cash flow hedges	$	(147	)	$	(146	)	$	(301	)	$	(301	)
Hedged item	(5		)	(5		)	(10		)	(7		)
Derivative designated as hedging instrument	5			4			10			5

Cross-Currency Interest Rate Swaps

In connection with the February 2018 Refinancing described in Note 16 of our 2018 10-K, we entered into certain cross-currency interest rate swap agreements to achieve more beneficial interest rates by effectively converting $460 million of our fixed-rate U.S. Dollar-denominated 2025 Secured Notes, including the semi-annual interest payments through October 2023, to fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946%. We have designated these cross-currency interest rate swap agreements as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar.

We use the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the fair value of the $460 million cross-currency interest rate swaps is reported in foreign currency translation gain (loss) in Accumulated other comprehensive income (loss). The cross-currency basis spread (along with other components of the cross-currency swap’s fair value excluded from the spot method effectiveness assessment) are amortized and recorded to interest expense. We evaluate the effectiveness of our net investment hedge at the beginning of each quarter.

The following table shows the fair value of our hedges:

	Balance Sheet Line Item	June 30, 2019		December 31, 2018
Interest rate swaps (1)(3)	Other liabilities	$	17	$	—
Cross-currency interest rate swaps (2)(3)	Other assets	29		18
(1) Losses of $11 million and $17 million for the three and six months ended June 30, 2019, respectively, are reflected in Derivative financial instrument unrealized (loss) gain in Other comprehensive loss.
(2) Loss of $5 million and gain of $11 million for the three and six months ended June 30, 2019, respectively, are reflected in Foreign currency translation gain (loss) in Other comprehensive loss.
(3) Inputs used to measure the fair value of our interest rate swap contracts are categorized as Level 2 in the fair value hierarchy.

Net Investment Non-derivative Hedge - 2026 Secured Euro Notes

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We designated $270 million of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar.

We use the spot method to measure the effectiveness of our net investment non-derivative hedge. Under this method, for each reporting period, the change in the hedged portion of the carrying value of the 2026 Secured Euro Notes due to remeasurement is reported in Foreign currency translation gain (loss) in Other comprehensive loss, and the remaining remeasurement change is recognized in Gain (loss) on remeasurement of debt in our consolidated statements of operations. We evaluate the effectiveness of our net investment non-derivative hedge at the beginning of each quarter, and the inputs used to measure the fair value of this non-derivative hedge are categorized as Level 2 in the fair value hierarchy.

Contingent Consideration Liabilities

In connection with our 2017 acquisitions, we have recorded certain contingent consideration liabilities, of which the values are primarily based on reaching certain earnings-based metrics. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and are remeasured each reporting period. The inputs used to measure the fair value of our liabilities are categorized as Level 3 in the fair value hierarchy.

Contingent consideration liabilities as of June 30, 2019 are $22 million of which $10 million is included in Accrued liabilities with the remainder included in Other long-term liabilities. Contingent consideration liabilities as of December 31, 2018 were $45 million of which $22 million was included in Accrued liabilities with the remainder included in Other long-term liabilities.

We did not have assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2019 other than disclosed in Note 7.

(13) Stockholders’ Deficit

Changes in Stockholders’ Deficit

The following tables present certain information regarding our stockholders’ deficit as of June 30, 2019 and June 30, 2018:

	Common Stock		Additional Paid in Capital		Accumulated Loss			Treasury Stock			Accumulated Other Comprehensive Loss			Noncontrolling Interest		Total
January 1, 2019	$	1	$	835	$	(2,824	)	$	(175	)	$	(300	)	$	—	$	(2,463	)
Net proceeds of common stock in connection with stock options and RSUs	—		2		—			—			—			—		2
Stock-based compensation	—		11		—			—			—			—		11
Net loss	—		—		(24		)	—			—			—		(24		)
Other comprehensive income	—		—		—			—			51			—		51
March 31, 2019	$	1	$	848	$	(2,848	)	$	(175	)	$	(249	)	$	—	$	(2,423	)
Net proceeds of common stock in connection with stock options and RSUs and other	—		2		—			—			—					2
Sale of SciPlay common stock and related transactions	—		328		—			—			—			91		419
Stock-based compensation	—		9		—			—			—			1		10
Net loss	—		—		(77		)	—			—			2		(75		)
Other comprehensive loss	—		—		—			—			(51		)	—		(51		)
June 30, 2019	$	1	$	1,187	$	(2,925	)	$	(175	)	$	(300	)	$	94	$	(2,118	)

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	Common Stock		Additional Paid in Capital			Accumulated Loss			Treasury Stock			Accumulated Other Comprehensive Loss			Total
January 1, 2018	$	1	$	808		$	(2,461	)	$	(175	)	$	(200	)	$	(2,027	)
Net proceeds of common stock in connection with stock options and RSUs	—		(15		)	—			—			—			(15		)
Stock-based compensation	—		7			—			—			—			7
Net loss	—		—			(202		)	—			—			(202		)
Adoption impact of ASC 606	—		—			(11		)	—			—			(11		)
Other Comprehensive income	—		—			—			—			52			52
March 31, 2018	$	1	$	800		$	(2,674	)	$	(175	)	$	(148	)	$	(2,196	)
Net proceeds of common stock in connection with stock options and RSUs	—		2			—			—			—			2
Stock-based compensation	—		15			—			—			—			15
Net loss	—		—			(6		)	—			—			(6		)
Other Comprehensive loss	—		—			—			—			(83		)	(83		)
June 30, 2018	$	1	$	817		$	(2,680	)	$	(175	)	$	(231	)	$	(2,268	)

SciPlay Stock Based Compensation

During the second quarter of 2019, SciPlay adopted the SciPlay Long-Term Incentive Plan (“SciPlay LTIP”). The SciPlay LTIP authorizes the issuance of up to 6.5 million shares of SciPlay’s Class A common stock to be granted in connection with awards of incentive and nonqualified stock options, restricted stock and stock units, stock appreciation rights and performance-based awards. As of June 30, 2019, there were 3.4 million of total time-based and performance-based SciPlay restricted stock units issued with an average grant price of $16.00 per share.

The following reflects total stock-based compensation expense recognized under all programs:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Related to SGC stock options	$	1	$	7	$	3	$	8
Related to SGC RSUs	5		8		17		16
Related to SciPlay RSUs	4		—		4		—
Total	$	10	$	15	$	24	$	24

(14) Income Taxes

We consider new evidence (both positive and negative) at each reporting date that could affect our view of the future realization of deferred tax assets. Based upon the evaluation of all available evidence, and considering the projected U.S. pre-tax losses for 2019, we maintain a valuation allowance for certain of our U.S. operations as of June 30, 2019. We maintained other valuation allowances for certain non-U.S. jurisdictions with cumulative losses.

The effective income tax rates for the three and six months ended June 30, 2019 were (10)% and (13)%, respectively, and 0% and (3%) for the three and six months ended June 30, 2018, respectively, and were determined using an estimated annual effective tax rate after considering any discrete items for such periods. Due to the aforementioned valuation allowance against certain U.S. net deferred tax assets, the effective tax rates for the three and six months ended June 30, 2019 and 2018 do not include the benefits of the U.S. tax losses, and we recorded an overall tax expense in both periods due to foreign pre-tax earnings. The change in the effective tax rates relates primarily to the overall mix of income in our foreign jurisdictions.

(15) Leases

On January 1, 2019, we adopted ASC 842 using the optional transition method provided by ASU 2018-11. Our operating leases primarily consist of real estate leases such as offices, warehouses, and research and development facilities. Our leases have remaining lease terms ranging from 1 year to 11 years, some of which include options to extend the leases for up to 5 years or to terminate the leases within 1 year. Our finance leases are immaterial.

26

Our total operating lease expenses for the three and six months ended June 30, 2019 were $10 million and $19 million, respectively, and were $8 million and $15 million for the three and six months ended June 30, 2018, respectively. The total amount of variable and short term lease payments were immaterial for all periods presented.

Supplemental balance sheet and cash flow information related to operating leases is as follows:

	June 30, 2019
Operating lease right-of-use assets	$	113
Accrued liabilities	26
Operating lease liabilities	95
Total operating lease liabilities	$	121
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	5
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases for the six months period	$	17
Weighted average remaining lease term, years	6
Weighted average discount rate	5		%

Lease liability maturities:

	Remainder of 2019		2020		2021		2022		2023		Thereafter		Less Imputed Interest			Total
Operating leases	$	16	$	30	$	25	$	19	$	16	$	34	$	(19	)	$	121

As of June 30, 2019, we did not have material additional operating leases that have not yet commenced.

(16) Litigation

We are involved in various routine and other specific legal proceedings, including the following which are described in Note 22 within our 2018 10-K: Colombia litigation, SNAI litigation, Washington State Matter, and the Raqqa Matter. There have been no material changes to these matters since the 2018 10-K was filed with the SEC, except as described below.

We record an accrual for legal contingencies when it is both probable that a liability has been incurred and the amount or range of the loss can be reasonably estimated (although, as discussed below, there may be an exposure to loss in excess of the accrued liability). We evaluate our accruals for legal contingencies at least quarterly and, as appropriate, establish new accruals or adjust existing accruals to reflect (1) the facts and circumstances known to us at the time, including information regarding negotiations, settlements, rulings and other relevant events and developments, (2) the advice and analyses of counsel and (3) the assumptions and judgment of management. Legal costs associated with our legal proceedings are expensed as incurred. We had accrued liabilities of $3 million and $4 million for all of our legal matters that were contingencies as of June 30, 2019 and December 31, 2018, respectively.

Substantially all of our legal contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss involves a series of complex judgments about future events. Consequently, the ultimate outcomes of our legal contingencies could result in losses in excess of amounts we have accrued. We may be unable to estimate a range of possible losses for some matters pending against us or our subsidiaries, even when the amount of damages claimed against us or our subsidiaries is stated because, among other things: (1) the claimed amount may be exaggerated or unsupported; (2) the claim may be based on a novel legal theory or involve a large number of parties; (3) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (4) there may be uncertainty as to the outcome of pending appeals or motions; (5) the matter may not have progressed sufficiently through discovery or there may be significant factual or legal issues to be resolved or developed; and/or (6) there may be uncertainty as to the enforceability of legal judgments and outcomes in certain jurisdictions. Other matters have progressed sufficiently that we are able to estimate a range of possible loss. For those legal contingencies disclosed in Note 22 in our 2018 10-K and this Note 16 as well as those related to the previously disclosed settlement agreement entered into in February 2015 with SNAI S.p.a., as to which a loss is reasonably possible, whether in excess of a related accrued liability or where there is no accrued liability, and for which we are able to estimate a range of possible loss, the current estimated range is up to approximately $14 million in

27

excess of the accrued liabilities (if any) related to those legal contingencies. This aggregate range represents management’s estimate of additional possible loss in excess of the accrued liabilities (if any) with respect to these matters based on currently available information, including any damages claimed by the plaintiffs, and is subject to significant judgment and a variety of assumptions and inherent uncertainties. For example, at the time of making an estimate, management may have only preliminary, incomplete, or inaccurate information about the facts underlying a claim; its assumptions about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse parties, regulators, indemnitors or co‑defendants, may prove to be wrong; and the outcomes it is attempting to predict are often not amenable to the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that management had not accounted for in its estimate because it had considered that outcome to be remote. Furthermore, as noted above, the aggregate range does not include any matters for which we are not able to estimate a range of possible loss. Accordingly, the estimated aggregate range of possible loss does not represent our maximum loss exposure. Any such losses could have a material adverse impact on our results of operations, cash flows or financial condition. The legal proceedings underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate.

TCS John Huxley Matter

On March 15, 2019, TCS John Huxley America, Inc., TCS John Huxley Europe Ltd., TCS John Huxley Asia Ltd., and Taiwan Fulgent Enterprise Co., Ltd. brought a civil action in the United States District Court for the Northern District of Illinois against SGC, Bally Technologies, Inc. and Bally Gaming, Inc. In the complaint, the plaintiffs assert federal antitrust claims arising from the defendants’ procurement of particular U.S. and South African patents. The plaintiffs allege that the defendants used those patents to create an allegedly illegal monopoly in the market for automatic card shufflers sold to regulated casinos in the United States. On April 10, 2019, the defendants filed a motion to dismiss the plaintiffs’ complaint with prejudice. On April 25, 2019, the district court denied the defendants’ motion to dismiss without prejudice pursuant to the court’s local rules, after the plaintiffs advised that they intended to file an amended complaint. The plaintiffs filed their amended complaint on May 3, 2019, and on May 22, 2019, the defendants filed a motion to dismiss the plaintiffs’ amended complaint with prejudice, which has not yet been ruled upon by the district court. We are currently unable to determine the likelihood of an outcome or estimate a range of reasonably possible loss.

For additional information regarding our pending litigation matters, see Note 22 in our 2018 10-K.

(17) Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

We conduct substantially all of our business through our U.S. and foreign subsidiaries. As of June 30, 2019, SGI’s obligations under the Secured Notes (other than the 2022 Secured Notes, which were redeemed in March 2018), the Unsecured Notes and the Subordinated Notes were fully and unconditionally and jointly and severally guaranteed by SGC and the Guarantor Subsidiaries other than SGI, and certain immaterial subsidiaries of SGC. The guarantees of our Secured Notes (other than the 2022 Secured Notes, which were redeemed in March 2018), Unsecured Notes and Subordinated Notes will terminate under the following customary circumstances: (1) the sale or disposition of the capital stock of the guarantor (including by consolidation or merger of the guarantor into another person); (2) the liquidation or dissolution of the guarantor; (3) the defeasance or satisfaction and discharge of the notes; (4) the release of the guarantor from any guarantees of indebtedness of SGC and SGI; and (5) the proper designation of the guarantor as an unrestricted subsidiary pursuant to the indenture governing the respective notes.

Presented below is condensed consolidating financial information for (1) SGC, (2) SGI, (3) the Guarantor Subsidiaries and (4) the Non-Guarantor Subsidiaries as of June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018. The condensed consolidating financial information has been presented to show the nature of assets held, results of operations and cash flows of SGC, SGI, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming the current guarantee structures of the Secured Notes (other than the 2022 Secured Notes, which were redeemed in March 2018), the Unsecured Notes and the Subordinated Notes were in effect at the beginning of the periods presented.

     The condensed consolidating financial information reflects the investments of SGC in SGI and in the Guarantor Subsidiaries and Non-Guarantor Subsidiaries using the equity method of accounting. They also reflect the investments of the Guarantor Subsidiaries in the Non-Guarantor Subsidiaries. Net changes in intercompany due from/due to accounts are reported in the accompanying Supplemental Condensed Consolidating Statements of Cash Flows as investing activities if the applicable entities have a net investment (asset) in intercompany accounts and as a financing activity if the applicable entities have a net intercompany borrowing (liability) balance.    

28

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	235		$	—		$	—	$	141	$	(7	)	$	369
Restricted cash	—			1			35		8		—			44
Accounts receivable, net	—			100			195		321		—			616
Notes receivable, net	—			—			104		16		—			120
Inventories	—			47			99		103		(11		)	238
Prepaid expenses, deposits and other current assets	—			61			61		75		1			198
Property and equipment, net	34			96			231		204		(33		)	532
Operating lease right-of-use asset	1			25			33		54		—			113
Investment in subsidiaries	3,136			1,163			1,427		—		(5,726		)	—
Goodwill	—			240			1,897		1,142		—			3,279
Intangible assets, net	37			34			1,186		403		—			1,660
Intercompany balances	—			5,868			67		—		(5,935		)	—
Software, net	48			36			109		72		—			265
Other assets(2)	95			419			41		376		(433		)	498
Total assets	$	3,586		$	8,090		$	5,485	$	2,915	$	(12,144	)	$	7,932
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	$	—		$	42		$	2	$	1	$	—		$	45
Other current liabilities	52			173			242		255		(34		)	688
Long-term debt, excluding current portion	—			8,793			8		1		—			8,802
Operating lease liabilities	1			21			28		45		—			95
Other long-term liabilities	96			23			605		168		(472		)	420
Intercompany balances	5,649			—			—		286		(5,935		)	—
Total SGC stockholders’ (deficit) equity	(2,212		)	(962		)	4,600		2,065		(5,703		)	(2,212		)
Noncontrolling interest	—			—			—		94		—			94
Total liabilities and total stockholders’ (deficit) equity	$	3,586		$	8,090		$	5,485	$	2,915	$	(12,144	)	$	7,932
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Includes $11 million and $1 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

29

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	74		$	1		$	—	$	94	$	(1	)	$	168
Restricted cash	—			1			32		6		—			39
Accounts receivable, net	—			79			205		315		—			599
Notes receivable, net	—			—			101		13		—			114
Inventories	—			40			82		111		(17		)	216
Prepaid expenses, deposits and other current assets	6			63			92		72		—			233
Property and equipment, net	31			112			219		218		(33		)	547
Investment in subsidiaries	2,836			975			1,093		—		(4,904		)	—
Goodwill	—			240			1,897		1,143		—			3,280
Intangible assets, net	43			34			1,291		441		—			1,809
Intercompany balances	—			6,054			—		—		(6,054		)	—
Software, net	58			39			128		60		—			285
Other assets(2)	110			404			46		308		(440		)	428
Total assets	$	3,158		$	8,042		$	5,186	$	2,781	$	(11,449	)	$	7,718
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	$	—		$	42		$	—	$	3	$	—		$	45
Other current liabilities	64			162			248		254		(26		)	702
Long-term debt, excluding current portion	—			8,991			—		1		—			8,992
Other long-term liabilities	106			8			637		172		(481		)	442
Intercompany balances	5,451			—			49		554		(6,054		)	—
Total SGC stockholders’ (deficit) equity	(2,463		)	(1,161		)	4,252		1,797		(4,888		)	(2,463		)
Total liabilities and total stockholders’ (deficit) equity	$	3,158		$	8,042		$	5,186	$	2,781	$	(11,449	)	$	7,718
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes.
(2) Includes $12 million and $1 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

30

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	147		$	358		$	407		$	(67	)	$	845
Cost of services, cost of product sales and cost of instant products(2)	—			94			108			176			(57		)	321
SG&A	31			9			48			94			(8		)	174
R&D	—			1			19			26			—			46
D&A	12			13			104			45			(4		)	170
Restructuring and other	1			1			1			3			—			6
Operating (loss) income	(44		)	29			78			63			2			128
Interest expense	—			(147		)	—			—			—			(147		)
Loss on debt financing transactions	—			(60		)	—			—			—			(60		)
Loss on remeasurement of debt	—			(3		)	—			—			—			(3		)
Other income (expense), net	16			131			(119		)	(14		)	—			14
Net (loss) income before equity in income of subsidiaries and income taxes	(28		)	(50		)	(41		)	49			2			(68		)
Equity in (loss) income of subsidiaries	(30		)	2			12			—			16			—
Income tax (expense) benefit	(19		)	14			9			(11		)	—			(7		)
Net (loss) income	(77		)	(34		)	(20		)	38			18			(75		)
Less: Net income attributable to noncontrolling interest	—			—			—			2			—			2
Net (loss) income attributable to SGC	$	(77	)	$	(34	)	$	(20	)	$	36		$	18		$	(77	)
Net (loss) income	$	(77	)	$	(34	)	$	(20	)	$	38		$	18		$	(75	)
Other comprehensive loss	(51		)	(15		)	(3		)	(66		)	84			(51		)
Total comprehensive loss	(128		)	(49		)	(23		)	(28		)	102			(126		)
Less: comprehensive income attributable to noncontrolling interest	—			—			—			2			—			2
Comprehensive loss attributable to SGC	$	(128	)	$	(49	)	$	(23	)	$	(30	)	$	102		$	(128	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Excludes D&A.

31

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	136		$	405		$	376		$	(72	)	$	845
Cost of services, cost of product sales and cost of instant products (2)	—			86			132			159			(61		)	316
SG&A	44			9			51			83			(13		)	174
R&D	—			1			22			26			—			49
D&A	12			7			107			50			(3		)	173
Restructuring and other	30			(3		)	2			5			—			34
Operating (loss) income	(86		)	36			91			53			5			99
Interest expense	—			(146		)	—			—			—			(146		)
Gain on remeasurement of debt	—			34			—			—			—			34
Other income (expense), net	17			132			(119		)	(23		)	—			7
Net (loss) income before equity in income of subsidiaries and income taxes	(69		)	56			(28		)	30			5			(6		)
Equity in income (loss) of subsidiaries	26			13			(17		)	—			(22		)	—
Income tax benefit (expense)	37			(26		)	(4		)	(7		)	—			—
Net (loss) income	$	(6	)	$	43		$	(49	)	$	23		$	(17	)	$	(6	)
Other comprehensive (loss) income	(83		)	30			(36		)	(119		)	125			(83		)
Comprehensive (loss) income	$	(89	)	$	73		$	(85	)	$	(96	)	$	108		$	(89	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes. (2) Excludes D&A.

32

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Six Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	305		$	716		$	792		$	(131	)	$	1,682
Cost of services, cost of product sales and cost of instant products(2)	—			195			210			328			(105		)	628
SG&A	66			20			107			188			(21		)	360
R&D	—			2			42			51			—			95
D&A	24			25			203			92			(9		)	335
Restructuring and other	2			1			3			7			—			13
Operating (loss) income	(92		)	62			151			126			4			251
Interest expense	—			(301		)	—			—			—			(301		)
Loss on debt financing transactions	—			(60		)	—			—			—			(60		)
Gain on remeasurement of debt	—			2			—			—			—			2
Other income (expense), net	36			263			(243		)	(36		)	—			20
Net (loss) income before equity in income of subsidiaries and income taxes	(56		)	(34		)	(92		)	90			4			(88		)
Equity in (loss) income of subsidiaries	(24		)	9			23			—			(8		)	—
Income tax (expense) benefit	(21		)	9			22			(21		)	—			(11		)
Net (loss) income	(101		)	(16		)	(47		)	69			(4		)	(99		)
Less: Net income attributable to noncontrolling interest	—			—			—			2			—			2
Net (loss) income attributable to SGC	$	(101	)	$	(16	)	$	(47	)	$	67		$	(4	)	$	(101	)
Net (loss) income	$	(101	)	$	(16	)	$	(47	)	$	69		$	(4	)	$	(99	)
Other comprehensive (loss) income	—			(6		)	(1		)	5			2			—
Total comprehensive loss	(101		)	(22		)	(48		)	74			(2		)	(99		)
Less: comprehensive income attributable to noncontrolling interest	—			—			—			2			—			2
Comprehensive (loss) income attributable to SGC	$	(101	)	$	(22	)	$	(48	)	$	72		$	(2	)	$	(101	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Excludes D&A.

33

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Six Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	266		$	792		$	745		$	(146	)	$	1,657
Cost of services, cost of product sales and cost of instant products (2)	—			172			250			313			(122		)	613
SG&A	82			20			109			162			(27		)	346
R&D	—			1			45			57			—			103
D&A	21			15			233			98			(6		)	361
Restructuring and other	56			(2		)	3			29			—			86
Operating (loss) income	(159		)	60			152			86			9			148
Interest expense	—			(301		)	—			—			—			(301		)
Loss on debt financing transactions	—			(93		)	—			—			—			(93		)
Gain on remeasurement of debt	—			33			—			—			—			33
Other income (expense), net	33			269			(252		)	(39		)	—			11
Net (loss) income before equity in income of subsidiaries and income taxes	(126		)	(32		)	(100		)	47			9			(202		)
Equity in (loss) income of subsidiaries	(58		)	17			(7		)	—			48			—
Income tax (expense) benefit	(24		)	8			21			(11		)	—			(6		)
Net (loss) income	$	(208	)	$	(7	)	$	(86	)	$	36		$	57		$	(208	)
Other comprehensive (loss) income	(31		)	12			(13		)	(46		)	47			(31		)
Comprehensive (loss) income	$	(239	)	$	5		$	(99	)	$	(10	)	$	104		$	(239	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes. (2) Excludes D&A.

34

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(35	)	$	55		$	101		$	147		$	(6	)	$	262
Cash flows from investing activities:
Capital expenditures	(9		)	(16		)	(56		)	(51		)	—			(132		)
Distributions of capital from equity investments	—			—			—			18			—			18
Additions to equity method investments	—			(1		)	—			—			—			(1		)
Other, principally change in intercompany investing activities	—			228			(52		)	—			(176		)	—
Net cash (used in) provided by investing activities	(9		)	211			(108		)	(33		)	(176		)	(115		)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	—			(251		)	—			(2		)	—			(253		)
Payments of debt issuance and deferred financing costs	—			(14		)	—			(1		)	—			(15		)
Payments on license obligations	(13		)	—			—			—			—			(13		)
Sale of future revenue	—			—			11			—			—			11
Net proceeds from the sale of SciPlay common stock	—			—			—			342			—			342
Payments of deferred SciPlay common stock offering costs	—			—			—			(8		)	—			(8		)
Net redemptions of common stock under stock-based compensation plans and other	(1		)	(2		)	(2		)	(2		)	—			(7		)
Other, principally change in intercompany financing activities	219			—			—			(395		)	176			—
Net cash provided by (used in) financing activities	205			(267		)	9			(66		)	176			57
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			1			—			1
Increase (decrease) in cash, cash equivalents and restricted cash	161			(1		)	2			49			(6		)	205
Cash, cash equivalents and restricted cash, beginning of period	74			2			44			101			(1		)	220
Cash, cash equivalents and restricted cash, end of period	$	235		$	1		$	46		$	150		$	(7	)	$	425
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes.

35

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(51	)	$	(59	)	$	85		$	164		$	(7	)	$	132
Cash flows from investing activities:
Capital expenditures	(22		)	(46		)	(89		)	(43		)	—			(200		)
Acquisitions of businesses and assets, net of cash acquired	—			—			(10		)	(264		)	—			(274		)
Distributions of capital from equity investments	—			—			—			23			—			23
Additions to equity method investments	—			(1		)	—			(74		)	—			(75		)
Other, principally change in intercompany investing activities	—			48			—			—			(48		)	—
Net cash (used in) provided by investing activities	(22		)	1			(99		)	(358		)	(48		)	(526		)
Cash flows from financing activities:
Proceeds net of payments on long-term debt	—			97			—			(4		)	—			93
Repayment of assumed NYX debt	—			—			—			(288		)	—			(288		)
Payments of debt issuance and deferred financing costs	—			(39		)	—			—			—			(39		)
Payments on license obligations	(14		)	—			—			—			—			(14		)
Net redemptions of common stock under stock-based compensation plans and other	(19		)	—			(2		)	—			—			(21		)
Other, principally change in intercompany financing activities	(581		)	—			15			518			48			—
Net cash (used in) provided by financing activities	(614		)	58			13			226			48			(269		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			(3		)	—			(3		)
(Decrease) increase in cash, cash equivalents and restricted cash	(687		)	—			(1		)	29			(7		)	(666		)
Cash, cash equivalents and restricted cash, beginning of period	733			—			44			60			(3		)	834
Cash, cash equivalents and restricted cash end of period	$	46		$	—		$	43		$	89		$	(10	)	$	168
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes.

36

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to enhance the reader’s understanding of our operations and current business environment and should be read in conjunction with the description of our business included under Part I, Item 1 “Condensed Consolidated Financial Statements” and Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and under Part I, Item 1 “Business,” and Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2018 10-K.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be read in conjunction with the disclosures and information contained and referenced under “Forward-Looking Statements” and “Risk Factors” included in this Quarterly Report on Form 10-Q and “Risk Factors” included in our 2018 10-K. As used in this MD&A, the terms “we,” “us,” “our” and the “Company” mean Scientific Games Corporation together with its consolidated subsidiaries.

BUSINESS OVERVIEW

We are a leading developer of technology-based products and services and associated content for the worldwide gaming, lottery, social and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino-management systems and table game products and services to licensed gaming entities; providing instant and draw-based lottery products, lottery systems and lottery content and services to lottery operators; providing social casino solutions to retail consumers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services.

Recent Events

• On April 4, 2019, we redeemed $1,000 million of our outstanding 2022 Unsecured Notes with a portion of the proceeds from the issuance of 2026 Unsecured Notes.

• On May 7, 2019, SciPlay completed an IPO for an 18.0% minority interest in our Social business segment, after giving effect to the underwriters’ partial exercise of their over-allotment option on June 4, 2019 (see Note 1).

◦ We believe the IPO will provide greater flexibility to pursue additional growth initiatives specifically designed for SciPlay. We received $312 million in net proceeds from the offering (net of $30 million used by SciPlay to pay the Offering fees and balance retained for general corporate purposes) which enables us to make substantial payments to reduce our debt.

Segments

We report our operations in four business segments - Gaming, Lottery, SciPlay and Digital - representing our different products and services. As a result of the SciPlay IPO and starting with the first quarter of 2019, we changed the calculation of SciPlay business segment AEBITDA, which now reflects corporate services obtained under an intercompany services agreement and certain royalties paid by the SciPlay business segment to other segments or to Corporate under an intercompany intellectual property license agreement. Business segment information for the three and six months ended June 30, 2018 has been recast to reflect these changes.  See "- Business Segments Results" below and Note 3 for additional business segment information.

Foreign Exchange

Our results are impacted by changes in foreign currency exchange rates used in the translation of foreign functional currencies into USD and the remeasurement of foreign currency transactions or balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity. Our exposure to foreign currency volatility on revenue is as follows:

37

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2019				2018				2019				2018
($ in millions)	Revenue		% Consolidated Revenue		Revenue		% Consolidated Revenue		Revenue		% Consolidated Revenue		Revenue		% Consolidated Revenue
Foreign Currency:
British Pound Sterling	$	78	9	%	$	80	10	%	$	163	10	%	$	163	10	%
Euro	61		7	%	59		7	%	117		7	%	113		7	%
Australian Dollar	26		3	%	28		3	%	42		2	%	53		3	%

We also have foreign currency exposure related to certain of our equity investments, cross-currency interest rate swaps, and Euro-denominated debt. See “Risk Factors” under Item 1A and “Consolidated Results — Other Factors Affecting 2018, 2017 and 2016 Net Loss Comparability— Foreign exchange” under Item 7 in our 2018 10-K and Item 3 “Quantitative and Qualitative Disclosures about Market Risk” in this Quarterly Report on Form 10-Q.

CONSOLIDATED RESULTS

	Three Months Ended   June 30,						Variance					Six Months Ended June 30,						Variance
($ in millions)	2019			2018			2019 vs. 2018					2019			2018			2019 vs. 2018
Total revenue	$	845		$	845		$	—		—	%	$	1,682		$	1,657		$	25		2	%
Total operating expenses	717			746			(29		)	(4	)%	1,431			1,509			(78		)	(5	)%
Operating income	128			99			29			29	%	251			148			103			70	%
Net loss before income taxes	(68		)	(6		)	(62		)	nm		(88		)	(202		)	114			(56	)%
Net loss	(75		)	(6		)	(69		)	nm		(99		)	(208		)	109			(52	)%
Net loss attributable to SGC	$	(77	)	$	(6	)	$	(71	)	nm		$	(101	)	$	(208	)	$	107		(51	)%
nm = not meaningful.

Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018

Revenue

	Three Months Ended June 30,				Variance					Six Months Ended June 30,				Variance
($ in millions)	2019		2018		2019 vs. 2018					2019		2018		2019 vs. 2018
Gaming	$	427	$	471	$	(44	)	(9	)%	$	849	$	914	$	(65	)	(7	)%
Lottery	231		207		24			12	%	458		409		49			12	%
SciPlay	118		100		18			18	%	236		197		39			20	%
Digital	69		67		2			3	%	139		137		2			1	%
Total revenue	$	845	$	845	$	—		—	%	$	1,682	$	1,657	$	25		2	%

Gaming revenue decreased for both comparable periods due to lower gaming operations revenue coupled with lower gaming machine and systems sales. The decrease in gaming operations was primarily due to the lower U.S. and Canadian ending installed base units coupled with lower average daily revenue for International units. The decrease in gaming machine sales was primarily due to lower U.S. and Canadian new unit sales coupled with lower average sales price per new unit, while the decrease in gaming systems sales is due to lower system and iVIEW^® installations due to nearing completion of certain Canadian systems launches.

Lottery revenue increased for both comparable periods primarily due to higher lottery systems revenue driven by equipment sales and organic domestic growth.

SciPlay revenue increased primarily due to continued growth in our mobile platform business, reflecting the ongoing popularity of Jackpot Party^® Casino, MONOPOLY Slots, Bingo Showdown^®, 88 Fortunes^®, and Quick Hit^® Slots.

Operating expenses

	Three Months Ended June 30,				Variance					Six Months Ended June 30,				Variance
($ in millions)	2019		2018		2019 vs. 2018					2019		2018		2019 vs. 2018
Operating expenses:
Cost of services	$	135	$	124	$	11		9	%	$	268	$	246	$	22		9	%
Cost of product sales	111		121		(10		)	(8	)%	218		226		(8		)	(4	)%
Cost of instant products	75		71		4			6	%	142		141		1			1	%
SG&A	174		174		—			—	%	360		346		14			4	%
R&D	46		49		(3		)	(6	)%	95		103		(8		)	(8	)%
D&A	170		173		(3		)	(2	)%	335		361		(26		)	(7	)%
Restructuring and other	6		34		(28		)	(82	)%	13		86		(73		)	(85	)%
Total operating expenses	$	717	$	746	$	(29	)	(4	)%	$	1,431	$	1,509	$	(78	)	(5	)%

Cost of revenue

The increase in cost of revenue for both comparable periods was primarily due to cost of services increase driven by the Lottery and SciPlay business segments correlated with these segments’ revenue growth and Lottery cost of product sales increase due to higher equipment sales, partially offset by Gaming cost of product sales decrease, correlated with lower gaming machine and systems sales.

SG&A

The increase for the six months ended June 30, 2019 is primarily due to higher SciPlay SG&A primarily driven by $19 million in marketing and player acquisition costs, partially offset by higher legal fees in the prior year period related to the Shuffle Tech Matter.

D&A

The decrease for the six months ended June 30, 2019 was primarily due to certain Gaming segment acquired intangible assets becoming fully depreciated during the first quarter of 2018, a $10 million higher impairment charge related to assets held for sale in the prior year comparable period coupled with higher Lottery segment D&A associated with certain lottery system contracts.

Restructuring and other

The decrease for both comparable periods is primarily due to lower employee severance charges and the nonrecurring nature of the Shuffle Tech charge recorded in the prior year. Additionally, the six months ended June 30, 2018 included an $18 million non-cash fair value contingent consideration remeasurement charge compared to $2 million in the current year three and six month periods. See Note 4 for additional details on Restructuring and other charges.

Other Factors Affecting Net Loss Attributable to SGC

38

	Three Months Ended June 30,					Six Months Ended June 30,						Factors Affecting Net Loss Attributable to SGC
(in millions)	2019			2018		2019			2018			2019 vs. 2018
Loss on debt financing transactions	$	(60	)	$	—	$	(60	)	$	(93	)	Loss on debt financing transactions consummated during the second quarter of 2019 includes a $50 million premium charge associated with the redemption of $1,000 million of the 2022 Unsecured Notes (see Note 11). Loss on debt financing transactions from our refinancing transactions consummated during the first quarter of 2018 includes a $110 million premium charge associated with the redemption of the 2022 Secured Notes.
(Loss) gain on remeasurement of debt	(3		)	34		2			33			(Losses) and gains are attributable to remeasurement of the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes and reflect changes in the Euro vs. the U.S. Dollar foreign exchange rates between the comparable periods.
Income tax expense	(7		)	—		(11		)	(6		)	The increase is primarily due to the overall mix of income in our foreign jurisdictions.
Net income attributable to noncontrolling interest	2			—		2			—			The three and six month periods for 2019 reflect SciPlay noncontrolling interest (see Note 1).

See “Business Segments Results” below for a more detailed explanation of the significant changes in our components of revenue within the individual segment results of operations.

BUSINESS SEGMENTS RESULTS

GAMING

Our Gaming business segment designs, develops, manufactures, markets and distributes a comprehensive portfolio of gaming products and services. We provide our Gaming portfolio of products and services to commercial casinos, Native American casinos, wide-area gaming operators such as licensed betting offices, arcade and bingo operators in the U.K. and continental Europe, and government agencies and their affiliated operators.

We generate Gaming revenue from both services and product sales. Our services revenue includes revenue earned from Participation gaming machines, other leased gaming machines (including VLTs and electronic table games), supplied table products and services (including Shufflers), casino management technology solutions and systems, and other services revenues. Our product sales revenue includes the sale of new and used gaming machines, electronic table games, VLTs and VGTs, casino-management technology solutions and systems, table products, PTG licensing, conversion kits (including game, hardware or operating system conversions) and spare parts. For additional information, refer to the Gaming primary business activities summary included within “Business Segment Results” under Item 7 of our 2018 10-K.

Current Year Update

We expect to continue to face pricing pressure in our Gaming business segment. We anticipate that replacement demand for gaming machines and constraints on capital spending by gaming operators will continue at current levels. We anticipate that demand for our gaming systems products and services will continue to decline due to several Canadian systems contracts nearing their completion. We believe we have begun to stabilize the erosion in the installed base of our Participation gaming machines. During the first quarter of 2019, we deployed the Twinstar^® Wave XL as an addition to our Gaming Operations platform.

Results of Operations and Key Performance Indicators for Gaming

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	Three Months Ended June 30,				Variance					Six Months Ended June 30,				Variance
($ in millions)	2019		2018		2019 vs. 2018					2019		2018		2019 vs. 2018
Total revenue	$	427	$	471	$	(44	)	(9	)%	$	849	$	914	$	(65	)	(7	)%
Total operating expenses	334		363		(29		)	(8	)%	663		734		(71		)	(10	)%
AEBITDA(1)	215		236		(21		)	(9	)%	430		454		(24		)	(5	)%
(1) The three and six months ended June 30, 2019 include $3 million and $10 million, respectively, in intellectual property royalties paid by the SciPlay business segment, which are no longer being paid as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the three and six months ended June 30, 2018 were $6 million and $13 million, respectively.

Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018

Revenue

	Three Months Ended June 30,					Variance					Six Months Ended June 30,					Variance
($ in millions)	2019			2018		2019 vs. 2018					2019			2018		2019 vs. 2018
Revenue:
Gaming operations	$	150		$	160	$	(10	)	(6	)%	$	302		$	321	$	(19	)	(6	)%
Gaming machine sales	148			168		(20		)	(12	)%	284			313		(29		)	(9	)%
Gaming systems	67			84		(17		)	(20	)%	141			159		(18		)	(11	)%
Table products	62			59		3			5	%	122			121		1			1	%
Total revenue	$	427		$	471	$	(44	)	(9	)%	$	849		$	914	$	(65	)	(7	)%
F/X impact on revenue	$	(4	)	$	4						$	(8	)	$	13
KPIs:
U.S. and Canadian units(1):
Installed base at period end	32,056			35,170		(3,114		)	(9	)%	32,056			35,170		(3,114		)	(9	)%
Average daily revenue per unit	$	38.98		$	38.75	$	0.23		1	%	$	38.71		$	38.57	$	0.14		—	%
International units(1):
Installed base at period end	34,112			33,329		783			2	%	34,112			33,329		783			2	%
Average daily revenue per unit	$	11.24		$	11.75	$	(0.51	)	(4	)%	$	11.33		$	12.04	$	(0.71	)	(6	)%
Gaming machine unit sales:
U.S. and Canadian new unit shipments	4,671			5,749		(1,078		)	(19	)%	9,472			10,416		(944		)	(9	)%
International new unit shipments	2,730			2,492		238			10	%	4,813			4,693		120			3	%
Total new unit shipments	7,401			8,241		(840		)	(10	)%	14,285			15,109		(824		)	(5	)%
Average sales price per new unit	$	17,436		$	17,699	$	(263	)	(1	)%	$	17,288		$	17,710	$	(422	)	(2	)%
(1) Effective the first quarter of 2019, we changed our gaming operation KPIs, which now reflect the installed base and average daily revenue broken down into two categories: U.S. and Canadian and International. This change reflects how the management team views the business and provides a clear representation of what drives our operating results.

Gaming Operations

Gaming operations revenue decreased for the three and six months ended June 30, 2019 primarily due to a 3,114-unit decrease in the ending installed base of U.S. and Canadian units coupled with a decrease in average daily revenue for International units. This decrease was partially offset by a 783-unit increase in the ending installed base for International units

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and an increase in the U.S. and Canadian average daily revenue of $0.23 per unit for the three month comparable period and $0.14 per unit for the six month comparable period.

Gaming Machine Sales

Gaming machine sales revenue decreased for both comparable periods primarily due to lower U.S. and Canadian unit shipments resulting primarily from fewer replacement unit sales for both comparable periods, coupled with a decrease in the average sales price per unit, reflecting a less favorable mix of gaming machine sales. This decrease was partially offset by the increase of International new unit shipments, which were largely driven by replacement units. The following table summarizes Gaming machine sales changes:

	Three Months Ended June 30,		Variance				Six Months Ended June 30,		Variance
	2019	2018	2019 vs. 2018				2019	2018	2019 vs. 2018
U.S. and Canadian unit shipments:
Replacement units	3,443	4,388	(945	)	(22	)%	6,637	8,131	(1,494	)	(18	)%
Casino opening and expansion units	1,228	1,361	(133	)	(10	)%	2,835	2,285	550		24	%
Total unit shipments	4,671	5,749	(1,078	)	(19	)%	9,472	10,416	(944	)	(9	)%
International unit shipments:
Replacement units	2,674	2,492	182		7	%	4,757	4,432	325		7	%
Casino opening and expansion units	56	—	56		100	%	56	261	(205	)	(79	)%
Total unit shipments	2,730	2,492	238		10	%	4,813	4,693	120		3	%

Gaming Systems

Gaming systems revenue decreased for both comparable periods primarily due to decreased sales coupled with fewer installations of new systems to casinos as a result of fewer casino openings and expansions and certain Canadian contracts that are nearing completion of systems launches.

Operating Expenses

The decrease in operating expenses for both comparable periods is primarily due to lower cost of revenue correlated with the decrease in revenue, lower SG&A and R&D expenses as a result of more efficient business operations, lower D&A as a result of certain Gaming segment acquired intangible assets becoming fully depreciated during the first quarter of 2018 and $10 million in a higher impairment charge related to assets held for sale in the prior year comparable periods.

AEBITDA

The decrease in AEBITDA for both comparable periods is due to lower revenue and a reduction of intellectual property royalties paid by the SciPlay business segment, which ended as of May 7, 2019 in connection with the IP License Agreement described in Note 1.

AEBITDA as a percentage of revenue (“AEBITDA margin”) for the six-month comparable period increased by 1 percentage point while the three-month comparable period AEBITDA margin was flat.

LOTTERY

Our Lottery business segment is primarily comprised of our instant products business and our systems-based services and product sales business. Our instant products business generates revenue from the manufacture and sale of instant products, as well as the provision of value-added services such as game design, sales and marketing support, specialty games and promotions, inventory management, warehousing, fulfillment services, as well as full instant product category management. In addition, we provide licensed games, promotional entertainment and internet-based marketing services to the lottery industry. These revenues are presented as instant products revenue.

Our systems-based services and product sales business provides customized computer software, software support, equipment and data communication services, and keno to lotteries. In the U.S., we typically provide the necessary point-of-sale

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terminals and equipment, software and maintenance services on a Participation basis under long-term contracts that typically have an initial term of at least five years. Internationally, we typically sell our point-of-sale terminals and/or computer software to lottery authorities and may provide ongoing fee-based systems maintenance and software support services. Refer to the Lottery primary business activities summary included within “Business Segment Results” under Item 7 of our 2018 10-K.

Current Year Update

We believe we will continue to face intense price-based competition in our Lottery business in 2019. In the near term, we also expect to see an increase in the number of jurisdictions that seek to privatize or outsource lottery operations and to face strong competition from both traditional and new competitors with respect to these opportunities. In addition, we anticipate that lottery RFPs, specifically those for private management agreements and certain of our international customers, could increasingly include terms that expose us to increased risk, such as requiring the guarantee of specific income thresholds or significant upfront payments. 

On March 4, 2019, we won a 10-year sports betting joint-venture contract to be the primary supplier and service provider to Turkey, Europe’s largest state-sponsored sports betting market and among the top three in the world in sales.

Results of Operations and Key Performance Indicators for Lottery

	Three Months Ended   June 30,				Variance				Six Months Ended June 30,				Variance
($ in millions)	2019		2018		2019 vs. 2018				2019		2018		2019 vs. 2018
Total revenue	$	231	$	207	$	24	12	%	$	458	$	409	$	49	12	%
Total operating expenses	164		135		29		22	%	322		275		47		17	%
AEBITDA	103		99		4		4	%	207		193		14		7	%

Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018

Revenue

	Three Months Ended June 30,					Variance				Six Months Ended June 30,					Variance
($ in millions)	2019			2018		2019 vs. 2018				2019			2018		2019 vs. 2018
Revenue:
Instant products	$	150		$	150	$	—	—	%	$	290		$	300	$	(10	)	(3	)%
Lottery systems	81			57		24		42	%	168			109		59			54	%
Total revenue	$	231		$	207	$	24	12	%	$	458		$	409	$	49		12	%
F/X impact on revenue	$	(4	)	$	3					$	(6	)	$	6

The primary factor driving the three and six-month increases in revenue was strength in lottery systems, principally on hardware sales. We generated $24 million and $59 million increases, respectively, in lottery systems revenue driven by equipment sales coupled with organic domestic growth. The total growth in the six-month comparable period was partially offset by a $10 million decrease in instant products revenue, primarily driven by lower domestic revenue as a result of a change in the timing and mix of shipment volumes among our contract types.

Operating Expenses

The increase in operating expenses for both comparable periods is due to higher cost of revenue correlated with the lottery systems revenue growth coupled with higher D&A associated with certain lottery systems contracts.

AEBITDA

AEBITDA for both comparable periods increased primarily due to lottery systems sales. AEBITDA margin for the three- and six-month comparable periods decreased by 3 percentage points and 2 percentage points, respectively, as a result of lower margin revenue mix associated with higher equipment sales.

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SCIPLAY

In our SciPlay business segment, we generate substantially all of our revenue from the sale of virtual coins, chips and bingo cards, which players can use to play slot, table games or bingo games (i.e., spin in the case of slot games, bet in the case of table games and use of bingo cards in the case of bingo games). The games are primarily our WMS^®, Bally^®, Barcrest^®, SHFL^®, Dragonplay^® and Bingo Showdown branded games. We offer both third-party branded games and original content. Substantially all of our SciPlay revenue is comprised of B2C transactions.

Our apps include Jackpot Party Casino, Gold Fish^® Casino, Quick Hit Slots, Hot Shot Casino^®, Bingo Showdown, 88 Fortunes, and MONOPOLY Slots on various platforms which include, Facebook, Apple, Google, and Amazon.

Current Year Update

We continue to pursue our multi-product strategy in our SciPlay business segment. On May 7, 2019, we completed the IPO for an 18.0% minority interest in our Social gaming business, after giving effect to the underwriters’ partial exercise of their over-allotment option on June 4, 2019 (see Business Overview section and Note 1).

Results of Operations and Key Performance Indicators for SciPlay

	Three Months Ended   June 30,				Variance				Six Months Ended June 30,				Variance
($ in millions)	2019		2018		2019 vs. 2018				2019		2018		2019 vs. 2018
Total revenue	$	118	$	100	$	18	18	%	$	236	$	197	$	39	20	%
Operating expenses	92		81		11		14	%	191		179		12		7	%
AEBITDA(1)	33		23		10		44	%	58		46		12		26	%
(1) The three and six months ended June 30, 2019 include charges of $3 million and $10 million, respectively, for intellectual property royalties paid to the Gaming business segment, which are no longer being paid as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the three and six months ended June 30, 2018 were $6 million and $13 million, respectively.

Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018

Revenue

	Three Months Ended June 30,						Variance					Six Months Ended June 30,						Variance
($ in millions)	2019			2018			2019 vs. 2018					2019			2018			2019 vs. 2018
Revenue:
Mobile	$	98		$	77		$	21		27	%	$	195		$	149		$	46		31	%
Web and other	20			23			(3		)	(13	)%	41			48			(7		)	(15	)%
Total revenue	$	118		$	100		$	18		18	%	$	236		$	197		$	39		20	%
KPIs:
SciPlay business segment:
Mobile Penetration(1)	83		%	77		%	6pp			nm		83		%	76		%	7pp			nm
Average MAU(2)	8.1			8.2			(0.1)			(1	)%	8.2			8.1			0.1			1	%
Average DAU(3)	2.7			2.6			0.1			4	%	2.7			2.6			0.1			4	%
ARPDAU(4)	$	0.48		$	0.42		$	0.06		14	%	$	0.48		$	0.42		$	0.06		14	%
nm = not meaningful. pp = percentage points. (1) Mobile penetration is defined as the percentage of B2C SciPlay business segment revenue generated from mobile platforms. (2) MAU = Monthly Active Users is a count of visitors to our sites during a month. An individual who plays two different games or from two different devices may, in certain circumstances, be counted twice. However, we use third-party data to limit the occurrence of double counting. (3) DAU = Daily Active Users is a count of visitors to our sites during a day. An individual who plays two different games or from two different devices may, in certain circumstances, be counted twice. However, we use third-party data to limit the occurrence of double counting. (4) ARPDAU = Average revenue per DAU is calculated by dividing revenue for a period by the DAU for the period by the number of days for the period.

Mobile platform revenue increased for both comparable periods primarily due to Jackpot Party Casino, MONOPOLY Slots, Bingo Showdown, 88 Fortunes, and Quick Hit Slots, which collectively represented substantially all of the revenue

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increase. Web platform and other revenue decreased for both comparable periods due to a decline in player levels as a result of player preferences causing a continued migration to mobile platforms.

Operating Expenses

Operating expenses increased for both comparable periods primarily due to higher cost of revenue correlated with the revenue growth, coupled with higher marketing and player acquisition costs to support ongoing growth initiatives.

AEBITDA

AEBITDA increased for both comparable periods primarily due to continued growth in revenue partially offset by higher cost of revenue and SG&A as described above. Additionally, for both comparable periods, the AEBITDA increases reflect a $3 million savings from termination of the intellectual property royalty payments to the Gaming business segment as of May 7, 2019, in connection with the IP License Agreement (See Note 1). As a result of these factors, AEBITDA margin for the three- and six-month comparable periods improved by 5 percentage points and 1 percentage points, respectively.

DIGITAL

Our Digital segment provides a comprehensive suite of digital gaming and sports betting solutions and services, including digital RMG and sports wagering solutions, distribution platforms, content, products and services. A portion of our Digital revenue consists of professional services related to highly customizable software design, development, licensing, maintenance and support services, which are derived from a comprehensive suite of technology solutions. These technology solutions allow our customers to operate sports books, which can offer sport (or non-sport) events and betting markets across both fixed-odds and pari-mutuel betting styles. We also provide the Open Platform System which offers a wide range of reporting and administrative functions and tools providing operators full control over all areas of digital gaming operations. Additionally, we derive revenue from our content aggregation platforms, including Open Gaming System (OGS), remote gaming servers, SG Universe^® platform and various other platforms, which can deliver a wide spectrum of internally developed and branded casino-style games and popular third-party provider casino-style games to gaming operators. Generally, we host the play of our game content on our centrally-located servers that are integrated with the online casino operators’ websites.

Current Year Update

• In January 2019, New Zealand Racing Board launched a sportsbook with our OpenBet^TM platform.

• In April 2019, we announced a partnership with Wynn Resorts to support their launch of both iGaming and sports in the U.S.

• In May 2019, we announced a partnership with Big Time Gaming to combine our growing portfolio of games with the popular Megaways^TM mechanic.

Results of Operations for Digital

	Three Months Ended   June 30,				Variance					Six Months Ended June 30,				Variance
($ in millions)	2019		2018		2019 vs. 2018					2019		2018		2019 vs. 2018
Total revenue	$	69	$	67	$	2		3	%	$	139	$	137	$	2		1	%
Operating expenses	78		75		3			4	%	156		149		7			5	%
AEBITDA	12		13		(1		)	(8	)%	25		30		(5		)	(17	)%

Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018

Revenue

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	Three Months Ended June 30,					Variance					Six Months Ended June 30,					Variance
($ in millions)	2019			2018		2019 vs. 2018					2019			2018		2019 vs. 2018
Revenue:
Sports and platform	$	26		$	20	$	6		30	%	$	56		$	46	$	10		22	%
Gaming and other	43			47		(4		)	(9	)%	83			91		(8		)	(9	)%
Total revenue	$	69		$	67	$	2		3	%	$	139		$	137	$	2		1	%
F/X impact on revenue	$	(4	)	$	—						$	(8	)	$	2
KPIs:
Gaming - Key Performance Indicators:
Wagers processed through OGS (in billions)	$	9.3		$	9.2	$	0.10		1	%	$	18.2		$	18.1	$	0.10		1	%

Operating Expenses and AEBITDA

The increase in operating expenses for both comparable periods is due to higher cost of revenue from third-party platforms coupled with higher D&A from platforms and enhancements developed in prior year periods. AEBITDA decreased for both comparable periods due to a less favorable revenue mix and the prior year six-month comparable period AEBITDA including the sale of certain intellectual property. AEBITDA margin for the three- and six-month comparable periods declined by 2 percentage points and by 4 percentage points, respectively.

RECENTLY ISSUED ACCOUNTING GUIDANCE

For a description of recently issued accounting pronouncements, see Note 1.  

CRITICAL ACCOUNTING ESTIMATES

For a description of our policies regarding our critical accounting estimates, see “Critical Accounting Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2018 10-K.

Other than our update to the Digital business segment reporting units during the first quarter of 2019 described in Note 8, there have been no significant changes in our critical accounting estimate policies or the application or the results of the application of those policies to our condensed consolidated financial statements from those presented in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2018 10-K.

LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL

Sources of Liquidity

As of June 30, 2019, our principal sources of liquidity, other than cash flows provided by operating activities were cash and cash equivalents and amounts available under our revolving credit facility and the SciPlay Revolver (for our SciPlay business segment) discussed below under “Credit Agreement and Other Debt.”

On April 4, 2019, we redeemed $1,000 million of our outstanding 2022 Unsecured Notes and paid accrued and unpaid interest thereon plus related premiums, fees and costs.

Cash and Available Revolver Capacity

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	As of
($ in millions)	June 30, 2019			December 31, 2018
Cash and cash equivalents(1)	$	369		$	168
Revolver capacity(2)	771			621
Revolver capacity drawn or committed to letters of credit	(58		)	(350		)
Total	$	1,082		$	439
(1) Includes $50 million of SciPlay cash and cash equivalents as of June 30, 2019.
(2) Includes $150 million of SciPlay Revolver capacity as of June 30, 2019.

The amount of our available cash and cash equivalents fluctuates principally based on borrowings or repayments under our credit facilities, investments, acquisitions and changes in our working capital position. The total borrowing capacity under our revolving credit facility will depend on the amount of outstanding borrowings and letters of credit issued and remaining in compliance with the covenants under the credit facility, including a maintenance covenant based on consolidated net first lien leverage. The total borrowing capacity under the SciPlay Revolver will depend on the amount of outstanding borrowings and letters of credit issued and remaining in compliance with the covenants under the SciPlay Revolver, including maintenance covenants based on total net leverage and fixed charge coverage beginning in the third quarter of 2019. We were in compliance with the covenants under all of our credit agreements as of June 30, 2019.

We believe that our cash flow from operations, available cash and cash equivalents and available borrowing capacity under our existing financing arrangements will be sufficient to meet our liquidity needs for the foreseeable future; however, we cannot assure that this will be the case. We believe that substantially all cash held outside the U.S. is free from legal encumbrances or similar restrictions that would prevent it from being available to meet our global liquidity needs.

Total cash held by our foreign subsidiaries was $99 million and $92 million as of June 30, 2019 and December 31, 2018, respectively.

Our Gaming operations and Lottery systems businesses generally require significant upfront capital expenditures, and we may need to incur additional capital expenditures in order to retain or win new contracts. Our ability to make payments on and to refinance our indebtedness and other obligations depends on our ability to generate cash in the future. We may also, from time to time, repurchase or otherwise retire or refinance our debt, through our subsidiaries or otherwise. In the event we pursue significant acquisitions or other expansion opportunities, we may need to raise additional capital. If we do not have adequate liquidity to support these activities, we may be unable to obtain financing for these cash needs on favorable terms or at all. For additional information regarding our cash needs and related risks, see Item 1A “Risk Factors” in our 2018 10-K.   

In addition, Lottery customers in the U.S. generally require service providers to provide performance bonds in connection with the relevant contract. As of June 30, 2019 our outstanding performance bonds totaled $230 million. Our ability to obtain performance bonds on commercially reasonable terms is subject to our financial condition and to prevailing market conditions, which may be impacted by economic and political events. Although we have not experienced difficulty in obtaining such bonds to date, we cannot assure that we will continue to be able to obtain performance bonds on commercially reasonable terms, or at all. For additional information regarding our surety or performance bonds in connection with our contracts, see Item 1A “Risk Factors” in our 2018 10-K.

As described in Note 1, on May 7, 2019, SciPlay completed an IPO for an 18.0% minority interest in our Social gaming business. We received $342 million in proceeds from the offering, ($30 million of which was used by SciPlay to pay the Offering fees and balance retained for general corporate purposes). These proceeds will enable us to make substantial payments to reduce our debt. During the second quarter of 2019, we paid down $145 million of our revolving credit facility. We currently do not expect SciPlay to declare or pay any cash dividends, other than tax distributions and certain cash distributions related to the impact of taxes pursuant to the TRA. If SciPlay discontinues the payment of, or is unable to pay, such distributions to us, this will reduce our available liquidity. Furthermore, the terms of indebtedness incurred by SciPlay may, and the terms of the SciPlay Revolver will, limit the ability of SciPlay to pay dividends or make other distributions to us, or to amend the agreements between SciPlay and us and our other subsidiaries. In 2018, the amount of dividends declared and paid by SciPlay to Bally Gaming, a wholly owned subsidiary of SGC, was $77 million.

The consummation of the IPO resulted in an 18.0% reduction of our economic interest in SciPlay, and as a result, we will only benefit from a portion of any profits and growth of that business, and from a portion of any dividends and other distributions from that business.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

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Cash Flow Summary

	Six Months Ended June 30,						Variance
($ in millions)	2019			2018			2019 vs. 2018
Net cash provided by operating activities	$	262		$	132		$	130
Net cash used in investing activities	(115		)	(526		)	411
Net cash provided by (used in) financing activities	57			(269		)	326
Effect of exchange rates on cash, cash equivalents and restricted cash	1			(3		)	4
Increase (decrease) in cash, cash equivalents and restricted cash	$	205		$	(666	)	$	871

Cash flows from operating activities

	Six Months Ended June 30,						Variance
($ in millions)	2019			2018			2019 vs. 2018
Net loss	$	(99	)	$	(208	)	$	109
Adjustments to reconcile net loss to cash flows from operations	440			482			(42		)
Changes in working capital accounts	(86		)	(138		)	52
Changes in deferred income taxes and other	7			(4		)	11

Net cash provided by operating activities compared to the prior year period increased primarily due to favorable changes in working capital accounts coupled with a lower net loss. The changes in our working capital accounts for the six months ended June 30, 2019 were primarily driven by favorable timing of accounts and notes receivable collections and billing, partially offset by an increase in inventory balances due to the timing of orders and shipments. The six months ended June 30, 2019 also include approximately $20 million outflow related to payments on contingent consideration liabilities.

Cash flows from investing activities

Net cash used in investing activities decreased primarily due to business acquisitions in prior year periods and second pro-rata concession funding payment to LNS of $74 million with no comparable activities in 2019 coupled with lower capital expenditures. Capital expenditures are composed of investments in systems, equipment and other assets related to contracts, property and equipment, intangible assets and software.

Cash flows from financing activities

Net cash provided by financing activities increased primarily due to SciPlay IPO net proceeds of $342 million in the second quarter of 2019, lower debt issuance and deferred financing and offering costs, partially offset by higher net payments of long-term debt.

Credit Agreement and Other Debt

For additional information regarding our credit agreement and other debt, interest rate risk and interest rate hedging instruments, see Notes 1, 16 and 17 and Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our 2018 10-K, and Note 11 and Note 12 in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

As of June 30, 2019, we did not have any significant off-balance sheet arrangements.

Contractual Obligations

Other than: (i) the private offering of $1,100 million of 2026 Unsecured Notes and redemption of $1,000 million of our outstanding 2022 Unsecured Notes (see Note 11) and (ii) a $24 million payment on contingent consideration liabilities, there have been no material changes to our contractual obligations disclosed under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity, Capital Resources and Working Capital — Contractual Obligations” in our 2018 10-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign exchange rates and commodity prices. The following are our primary exposures to market risks:

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Interest Rate Risk    

As of June 30, 2019, the face value of long term debt was $8,968 million, including $4,167 million of variable-rate obligations. Assuming a constant outstanding balance for our variable-rate long term debt, a hypothetical 1% change in interest rates would decrease/increase interest expense by approximately $42 million. All of our interest rate sensitive financial instruments are held for purposes other than trading purposes.

We have attempted to limit our exposure to interest rate risk by using interest rate swap contracts to mitigate interest rate risk associated with a portion of our variable rate debt instruments. The objective of our interest rate swap contracts, which are designated as cash flow hedges of the future interest payments, is to eliminate the variability of cash flows attributable to the LIBOR component of interest expense to be paid on a portion of our variable rate debt.

Cross-Currency Interest Rate Swaps

In connection with the February 2018 Refinancing (see Note 16 in our 2018 Form 10-K), we entered into certain cross-currency interest rate swap agreements to achieve more attractive interest rates by effectively converting $460 million of our fixed-rate U.S. Dollar-denominated 2025 Secured Notes, including the semi-annual interest payments through October 2023, to a fixed-rate Euro-denominated debt, with a fixed annual weighted interest rate of approximately 2.946%. We have designated these cross-currency interest rate swap agreements as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar.

As of June 30, 2019, if these cross-currency interest rate swap agreements were ineffective, the fluctuations in the exchange rates between the Euro and the U.S. Dollar would impact the amount of U.S. Dollars that we would require to settle the Euro-denominated debt at maturity of these agreements. A hypothetical 10% change in the U.S. Dollar in comparison to the Euro exchange rate upon inception of the cross-currency interest rate swap would have increased/decreased our obligation to cash settle the exchanged principal portion in U.S. Dollars by approximately $46 million.

Net Investment Non-derivative Hedge - 2026 Secured Euro Notes

In February 2018, we designated a portion of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar.

Fluctuations in the exchange rates between the Euro and the U.S. Dollar will impact the amount of U.S. Dollars that we will require to settle the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes at maturity. A hypothetical 10% change in U.S. Dollar in comparison to the Euro as of June 30, 2019, would have increased/decreased our obligation to cash settle the principal portion of the 2026 Secured and Unsecured Euro Notes in U.S. Dollars by approximately $66 million.

For additional information regarding interest rate swap contracts, cross-currency interest rate swaps and net investment non-derivative hedges see Note 12.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

During the first quarter of 2019, we implemented changes to our internal controls to address the adoption of ASC 842, including controls to enable the preparation of financial information.

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

48

For a description of our legal proceedings, see Note 16 in this Quarterly Report on Form 10-Q and Note 22 in our 2018 10-K.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed under Item 1A “Risk Factors” included in our 2018 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There was no stock repurchase activity during the three and six months ended June 30, 2019.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

49

Item 6. Exhibits

Exhibit Number	Description
3.1(a)	Articles of Merger filed with the Secretary of State of the State of Nevada on January 10, 2018 (incorporated by reference to Exhibit 3.3 to Scientific Games Corporation’s Current Report on Form 8-K filed on January 10, 2018).
3.1(b)	Certificate of Merger filed with the Secretary of State of the State of Delaware on January 10, 2018 (incorporated by reference to Exhibit 3.4 to Scientific Games Corporation's Current Report on Form 8-K filed on January 10, 2018).
3.1(c)	Amended and Restated Articles of Incorporation of Scientific Games Corporation, filed with the Secretary of State of the State of Nevada on January 10, 2018 (incorporated by reference to Exhibit 3.1 to Scientific Games Corporation’s Current Report on Form 8-K filed on January 10, 2018).
3.2	Amended and Restated Bylaws of Scientific Games Corporation, effective as of January 10, 2018 (incorporated by reference to Exhibit 3.2 to Scientific Games Corporation’s Current Report on Form 8-K filed on January 10, 2018).
10.1	Tax Receivable Agreement, dated May 7, 2019, by and among SciPlay Corporation, SciPlay Parent Company, LLC and each of the Members (as defined therein) from time to time party thereto (incorporated by reference to Exhibit 10.1 to Scientific Games Corporation’s Current Report on Form 8-K filed on May 8, 2019).
10.2	Amendment to Employment Agreement, dated as of May 7, 2019, by and between Scientific Games Corporation and Barry L. Cottle (incorporated by reference to Exhibit 10.2 to Scientific Games Corporation’s Current Report on Form 8-K filed on May 8, 2019).*
10.3	Social Award Agreement, dated as of May 7, 2019, by and between SciPlay Corporation and Barry L. Cottle (incorporated by reference to Exhibit 10.3 to Scientific Games Corporation’s Current Report on Form 8-K filed on May 8, 2019).*
10.4	Second Amendment to Consulting Agreement, dated as of April 29, 2019, by and between Scientific Games Corporation and Richard Haddrill. (incorporated by reference to Exhibit 10.4 to Scientific Games Corporation’s Quarterly Report on Form 10-Q filed on May 8, 2019).*
10.5	Amendment to Amended and Restated Employment Agreement, dated as of May 28, 2019, by and between Scientific Games Corporation and Derik Mooberry.*(†)
10.6	Scientific Games Corporation 2003 Incentive Compensation Plan (Amended and Restated as of June 12, 2019) (incorporated by reference to Exhibit 10.1 to Scientific Games Corporation’s Current Report on Form 8-K filed on June 14, 2019).*
31.1	Certification of the Chief Executive Officer of Scientific Games Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (†)
31.2	Certification of the Chief Financial Officer of Scientific Games Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (†)
32.1	Certification of the Chief Executive Officer of Scientific Games Corporation pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
32.2	Certification of the Chief Financial Officer of Scientific Games Corporation pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF	Inline XBRL Taxonomy Definition Label Linkbase
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase

50

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

(†) Filed herewith.

*Management contracts and compensation plans and arrangements.

51

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SCIENTIFIC GAMES CORPORATION
		(Registrant)
		By:	/s/ Michael A. Quartieri
		Name:	Michael A. Quartieri
		Title:	Executive Vice President, Chief Financial Officer, Treasurer and Corporate Secretary
		By:	/s/ Michael F. Winterscheidt
		Name:	Michael F. Winterscheidt
		Title:	Senior Vice President and Chief Accounting Officer
Dated:	August 1, 2019

52

EX-10.5

Exhibit 10.5

Execution Version

Amendment to Amended and Restated Employment Agreement

This Amendment to the Amended and Restated Employment Agreement (this “Amendment”) is made effective as of May 28, 2019 (“Amendment Effective Date”) by and between Scientific Games Corporation, a Nevada corporation (the “Company”) and Derik Mooberry (“Executive”).

WHEREAS, the Company and Executive entered into an Amended and Restated Employment Agreement dated as of May 14, 2018 (the “Agreement”);

WHEREAS, Executive is currently serving as Executive Vice President, Strategic Projects; and

WHEREAS, the Company and Executive wish to enter into this Amendment in order to set forth terms and conditions of Executive’s continued employment with the Company.

NOW THEREFORE, in consideration of the premises and the mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Extension of Agreement Term. The Agreement is hereby amended by deleting the second sentence of Section 1 and replacing it with the following:

“The term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on the Effective Date and ending on June 1, 2020, as may be extended in accordance with this Section 1 and subject to earlier termination in accordance with Section 4.”

2. Title Change. The Agreement is hereby amended by deleting the first two sentences of Section 2 and replacing them with the following:

“Beginning on the Amendment Effective Date, and for the remainder of the Term, and subject to the remaining provisions of this Section 2, Executive will serve as Executive Vice President and Group Chief Executive, Gaming (or such other title, functions, duties and responsibilities as are determined by the Company, in its sole discretion, pursuant to this Section 2) of the Company and as an officer or director of any subsidiary or affiliate of the Company if elected or appointed to such positions, as applicable, during the Term. At such time that Executive’s successor begins employment with the Company, Executive’s title will revert to Executive Vice President, Strategic Projects.”

3. Increase in Base Salary. The Agreement is hereby amended by adding the following sentence to the end of Section 3(a):

“Effective as of the Amendment Effective Date, Executive’s base salary is increased to seven hundred fifty thousand U.S. dollars ($750,000) per annum.”

4. Eligibility for Incentive Compensation. The Agreement is hereby amended by deleting Section 3(b) and replacing it with the following:

“Executive shall have the opportunity annually to earn incentive compensation (“Incentive Compensation”) during the Term in amounts determined by the Compensation Committee of the Board (the “Compensation Committee”) in its sole discretion in accordance with the applicable incentive compensation plan of the Company as in effect from time to time (the

“Incentive Compensation Plan”). Under such Incentive Compensation Plan, effective as of the Amendment Effective Date, Executive shall have the opportunity annually to earn up to 75% of Executive’s base salary as Incentive Compensation at “target opportunity” (“Target Bonus”) and up to 200% of Executive’s target bonus opportunity as Incentive Compensation at “maximum opportunity” on the terms and subject to the conditions of such Incentive Compensation Plan (any such Incentive Compensation to be subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive).”

5. Termination by the Company without Cause or by Executive for Good Reason. The Agreement is hereby amended by deleting Sections (4)(e)(ii) and 4(e)(iii) and replacing them with the following:

“ii.    an amount equal to the sum of (A) two (2) times Executive’s annual base salary and (B) an amount equal to the highest annual Incentive Compensation paid to Executive in respect of the two (2) most recent fiscal years of the Company but in no event more than 75% of Executive’s base salary (such amount under this sub-clause (B), the “Severance Bonus Amount”), such amount under this clause (ii) payable in equal installments in accordance with the Company’s normal payroll practices over a period of 24 months after such termination, and otherwise in accordance with Section 4(g); provided, however, that if the Company provides Executive notice of termination under this Section 4(e) on or before September 30, 2019, the Company, in its sole discretion, may elect to pay the Executive one (1) times annual base salary instead of two (2) times as set forth above in clause 4(e)(ii)(A), but if Company makes such election the “Covered Time” (as defined in clause 5.1(e)) will be reduced from 24 months to 12 months and the time period over which the payments will be made to Executive under this Section (4)(e)(ii) will be reduced from 24 months to 12 months (such election by the Company is defined as the “Reduced Severance/Covered Time Option”). If it is electing the Reduced Severance/Covered Time Option, the Company will notify Executive no later than September 30, 2019. In the event that the Company notifies the Executive of his termination on or before September 30, 2019 and the Company elects the Reduced Severance/Covered Time Option, the Company and Executive agree that Executive’s last day as an employee will be December 31, 2019;

iii.    no later than March 15 following the end of the year in which such termination occurs, payment of an amount equal to (A) the Incentive Compensation which would have been payable to Executive had Executive remained in employment with the Company during the entire year in which such termination occurs, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which such termination occurs; provided, however, in the event Executive receives two (2) times his annual base salary as severance in accordance with clause 4(e)(ii), then the amount paid to Executive in connection with this Section 4(e)(iii) will be doubled;”

6. Expiration of Term of Agreement. The Agreement is hereby amended by deleting Sections 4(f)(ii) and 4(f)(iii) and replacing them with the following:

“ii.    an amount equal to the sum of (A) two (2) times Executive’s annual base salary and (B) the Severance Bonus Amount (as defined in Section 4(e)(ii)), such amount under this clause (ii) payable in equal installments in accordance with the Company’s normal

2

payroll practices over a period of 24 months after such termination, and otherwise in accordance with Section 4(g);

iii.    no later than March 15 following the end of the year in which such termination occurs, payment of an amount equal to two (2) times (A) the Incentive Compensation which would have been payable to Executive had Executive remained in employment with the Company during the entire year in which such termination occurs, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which such termination occurs;”

7.Except as set forth in this Amendment, all terms and conditions of the Agreement shall remain unchanged and in full force and effect in accordance with their terms. All references to the “Agreement” in the Agreement shall refer to the Agreement as amended by this Amendment.Any defined terms used in this Amendment and not defined herein shall have the meaning as set forth in the Agreement.

8.    This Amendment may be executed in counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Amendment as of May 28, 2019.

SCIENTIFIC GAMES CORPORATION

By: /s/ Shawn Williams            

Name:    Shawn Williams

Title: Chief Human Resources Officer

/s/ Derik Mooberry            

Derik Mooberry

3

EX-31.1

Exhibit 31.1

Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Barry L. Cottle, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of Scientific Games Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2019

/s/ Barry L. Cottle

Barry L. Cottle

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael A. Quartieri, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of Scientific Games Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2019

/s/ Michael A. Quartieri

Michael A. Quartieri

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Scientific Games Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barry L. Cottle, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Barry L. Cottle

Barry L. Cottle

Chief Executive Officer

August 1, 2019

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Scientific Games Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Quartieri, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that, to my knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Michael A. Quartieri

Michael A. Quartieri

Chief Financial Officer

August 1, 2019

XML

COVER - shares	6 Months Ended
	Jun. 30, 2019	Jul. 29, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	0-13063
Entity Registrant Name	SCIENTIFIC GAMES CORPORATION
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	81-0422894
Entity Address, Address Line One	6601 Bermuda Road
Entity Address, City or Town	Las Vegas
Entity Address, State or Province	NV
Entity Address, Postal Zip Code	89119
City Area Code	702
Local Phone Number	897-7150
Title of 12(b) Security	Common Stock, $.001 par value
Trading Symbol	SGMS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		93,143,095
Entity Central Index Key	0000750004
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue:
Total revenue		$ 845	$ 845	$ 1,682	$ 1,657
Operating expenses:
Cost of services, cost of product sales and cost of instant products(2)		321	316	628	613
Selling, general and administrative		174	174	360	346
Research and development		46	49	95	103
Depreciation, amortization and impairments		170	173	335	361
Restructuring and other		6	34	13	86
Operating (loss) income		128	99	251	148
Other (expense) income:
Interest expense		(147)	(146)	(301)	(301)
Earnings from equity investments		7	5	13	12
Gain (Loss) on Extinguishment of Debt		(60)	0	(60)	(93)
(Loss) gain on remeasurement of debt		(3)	34	2	33
Other income (expense), net		7	2	7	(1)
Total other expense, net		(196)	(105)	(339)	(350)
Net (loss) income before equity in income of subsidiaries and income taxes		(68)	(6)	(88)	(202)
Income tax expense		(7)	0	(11)	(6)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest		(75)	(6)	(99)	(208)
Net Income (Loss) Attributable to Noncontrolling Interest		2	0	2	0
Net (loss) income		$ (77)	$ (6)	$ (101)	$ (208)
Basic and diluted net loss attributable to SGC per share:
Basic (in dollars per share)		$ (0.83)	$ (0.06)	$ (1.09)	$ (2.29)
Diluted (in dollars per share)		$ (0.83)	$ (0.06)	$ (1.09)	$ (2.29)
Weighted average number of shares used in per share calculations:
Basic (in shares)		93	91	93	91
Diluted (in shares)		93	91	93	91
Services
Revenue:
Total revenue		$ 457	$ 438	$ 916	$ 876
Operating expenses:
Cost of services, cost of product sales and cost of instant products(2)	[1]	135	124	268	246
Product sales
Revenue:
Total revenue		238	257	476	481
Operating expenses:
Cost of services, cost of product sales and cost of instant products(2)	[1]	111	121	218	226
Instant products
Revenue:
Total revenue		150	150	290	300
Operating expenses:
Cost of services, cost of product sales and cost of instant products(2)	[1]	$ 75	$ 71	$ 142	$ 141

[1] Exclusive of D&A

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Statement - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (75)	$ (6)	$ (99)	$ (208)
Other comprehensive loss:
Foreign currency translation (loss) gain, net of tax	(39)	(88)	16	(37)
Pension and post-retirement (loss) gain, net of tax	(1)	1	0	0
Derivative financial instruments unrealized (loss) gain, net of tax	(11)	4	(16)	6
Other comprehensive loss	(126)	(89)	(99)	(239)
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	2	0	2	0
Comprehensive loss attributable to SGC	$ (128)	$ (89)	$ (101)	$ (239)

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 369	$ 168
Restricted cash	44	39
Accounts receivable, net	616	599
Notes receivable, net	120	114
Inventories	238	216
Prepaid expenses, deposits and other current assets	198	233
Total current assets	1,585	1,369
Non-current assets:
Restricted cash	12	13
Notes receivable, net	42	40
Property and equipment, net	532	547
Operating lease right-of-use assets	113	0
Goodwill	3,279	3,280
Intangible assets, net	1,660	1,809
Software, net	265	285
Equity investments	273	298
Other assets	171	77
Total assets	7,932	7,718
Current liabilities:
Current portion of long-term debt	45	45
Accounts payable	201	225
Accrued liabilities	487	477
Total current liabilities	733	747
Deferred income taxes	108	108
Operating lease liabilities	95	0
Operating lease liabilities	312	334
Long-term debt, excluding current portion	8,802	8,992
Total liabilities	10,050	10,181
Commitments and contingencies (see Note 16)
Stockholders’ deficit:
Common Stock, Value, Outstanding	1	1
Additional Paid in Capital, Common Stock	1,187	835
Retained Earnings (Accumulated Deficit)	(2,925)	(2,824)
Treasury Stock, Value	(175)	(175)
Accumulated Other Comprehensive Income (Loss), Net of Tax	(300)	(300)
Total SGC stockholders’ deficit	(2,212)	(2,463)
Stockholders' Equity Attributable to Noncontrolling Interest	94	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	(2,118)	(2,463)
Total liabilities and total stockholders’ (deficit) equity	$ 7,932	$ 7,718

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jan. 10, 2018	Jun. 30, 2019	Dec. 31, 2018	Jan. 11, 2018
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)		199,300,000.0	199,300,000.0
Common stock, shares issued (in shares)		110,000,000	109,000,000
Common stock, shares outstanding (in shares)		93,000,000	92,000,000
Treasury stock, at cost, shares held (in shares)		17,000,000	17,000,000
Shares of surviving corporation (in shares)	1

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (99)	$ (208)
Adjustments to reconcile net loss to cash provided by operating activities	440	482
Changes in working capital accounts, net of effects of acquisitions	(86)	(138)
Changes in deferred income taxes and other	7	(4)
Net cash provided by operating activities	262	132
Cash flows from investing activities:
Capital expenditures	(132)	(200)
Acquisitions of businesses and assets, net of cash acquired	0	(274)
Distributions of capital from equity investments	18	23
Additions to equity method investments	1	75
Net cash (used in) provided by investing activities	(115)	(526)
Cash flows from financing activities:
Proceeds from Lines of Credit	40	185
Repayments under revolving credit facility	(320)	(380)
Proceeds from issuance of senior notes and term loans	1,100	2,512
Repayment of senior notes and term loans (inclusive of redemption premium)	(1,050)	(2,210)
Repayment of assumed NYX debt	0	(288)
Payments on long-term debt	(23)	(14)
Payment of Deferred Financing Costs	(15)	(39)
Payments on license obligations	(13)	(14)
Sale of future revenue	11	0
Proceeds from Issuance of Common Stock	342	0
Payments of deferred SciPlay common stock offering costs	(8)	0
Net redemptions of common stock under stock-based compensation plans and other	(7)	(21)
Net cash provided by (used in) financing activities	57	(269)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1	(3)
Increase (decrease) in cash, cash equivalents and restricted cash	205	(666)
Cash, cash equivalents and restricted cash, beginning of period	220	834
Cash, cash equivalents and restricted cash, end of period	425	168
Supplemental cash flow information:
Cash paid for interest	270	366
Income taxes paid	18	15
Distributed earnings from equity investments	22	19
Supplemental non-cash transactions:
Non-cash rollover and refinancing of Term loans	0	3,275
Non-cash interest expense	13	12
NYX non-cash consideration transferred (including 2017 acquisition of ordinary shares)	$ 0	$ 93

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Description of the Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of the Business and Summary of Significant Accounting Policies

Description of the Business and Summary of Significant Accounting Policies

Description of the Business

We are a leading developer of technology-based products and services and associated content for the worldwide gaming, lottery, social and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino-management systems and table game products and services to licensed gaming entities; providing instant and draw-based lottery products, lottery systems and lottery content and services to lottery operators; providing social casino solutions to retail consumers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We report our operations in four business segments—Gaming, Lottery, SciPlay (formerly referred to as our Social business segment) and Digital.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The accompanying condensed consolidated financial statements include the accounts of SGC and those subsidiaries in which we have a controlling financial interest. Investments in other entities in which we do not have a controlling financial interest but we exert significant influence are accounted for in our condensed consolidated financial statements using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of SGC and its management, we have made all adjustments necessary to present fairly our consolidated financial position, results of operations and comprehensive income (loss) and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2018 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.

SciPlay Initial Public Offering and Noncontrolling Interest

On May 7, 2019, SciPlay completed an initial public offering (“IPO”) for an 18.0% minority interest in our Social gaming business, after giving effect to the underwriters’ partial exercise of their over-allotment option on June 4, 2019. SciPlay has two classes of common stock - Class A common stock, which is traded on The NASDAQ Global Select Market under the symbol “SCPL,” and Class B common stock. On all matters submitted to a vote of SciPlay stockholders, Class B common stock entitles SGC to ten votes per share (for so long as the number of shares of SciPlay common stock beneficially owned by SGC represents at least 10% of SciPlay’s outstanding shares of common stock and, thereafter, one vote per share), and SciPlay Class A common stock entitles its owners to one vote per share. As of June 30, 2019, SGC owned all of the outstanding Class B common stock, which represents approximately 82.0% of SciPlay’s total outstanding shares of common stock and approximately 97.9% of the combined voting power of both classes of SciPlay’s outstanding common stock. Accordingly, SGC continues to control shares representing a majority of the combined voting power in SciPlay and continues to have a controlling financial interest in and consolidate SciPlay, (formerly referred to as our Social business segment) subsequent to the IPO.

The corporate structure of the above transaction is commonly referred to as an “Up‑C” structure, which is often used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up‑C structure allows us to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following the IPO. We continue to maintain a full valuation allowance on certain of our U.S. net deferred tax assets, and we continue to monitor and assess positive and negative evidence with respect to our ability to realize our deferred tax assets.

In connection with the SciPlay IPO we also entered into the following transactions:

• A tax receivable agreement (“TRA”), which provides for the payment by SciPlay to SGC of 85% of the amount of tax benefits, if any, that SciPlay actually realizes (or in some circumstances is deemed to realize) as a result of (i) increases in the tax basis of assets of SciPlay Parent Company, LLC (“SciPlay Parent LLC”) (a) in connection with the SciPlay IPO, (b) resulting from any redemptions or exchanges of membership interests of SciPlay Parent LLC pursuant to the SciPlay Parent LLC Operating Agreement or (c) resulting from certain distributions (or deemed distributions) by SciPlay Parent LLC and (ii) certain other tax benefits related to SciPlay’s making of payments under the TRA. 

• An Intercompany Services Agreement, under which SGC provides to SciPlay certain corporate level general and administrative services, including but not limited to, finance, corporate development, human resources, legal (which could include liability related to litigation awards related to SciPlay), information technology and rental fees for shared assets. These expenses will be charged to SciPlay and settled in cash.

• An intellectual property license agreement (“IP License Agreement”), pursuant to which SciPlay acquired the following licenses from a restricted subsidiary of SGC for a one-time payment of $255 million: (i) an exclusive (subject to certain limited exceptions), perpetual, non-royalty bearing license to use intellectual property created or acquired by Bally Gaming, Inc. (“Bally Gaming”) or its affiliates on or before the third anniversary of the date of the IP License Agreement (the date of the IP License Agreement, the “Effective Date”), in any of the Covered Games (defined as any of SciPlay’s currently available or future social games that are developed for mobile platforms, social media platforms, internet platforms or other interactive platforms and distributed solely via digital delivery); (ii) an exclusive (subject to certain limited exceptions and payment of royalties owed to third-party licensors for SciPlay’s use of third-party licensed property) license to use third-party intellectual property licensed to Bally Gaming or its affiliates on or before the third anniversary of the Effective Date, to the extent permitted to be sublicensed to SciPlay, in any of the Covered Games; (iii) a non-exclusive, perpetual, non-royalty bearing license to use intellectual property created or acquired by Bally Gaming or its affiliates after the third anniversary of the Effective Date, but only in SciPlay’s currently available games; and (iv) a non-exclusive license to use third-party intellectual property licensed to Bally Gaming or its affiliates after the third anniversary of the Effective Date, to the extent permitted to be sublicensed to SciPlay, but only in SciPlay’s currently available games.

As a result of the IP License Agreement described above, SciPlay is no longer required to pay to Bally Gaming future royalties and or fees for use of intellectual property owned by Bally Gaming or its affiliates for SciPlay’s currently available games. Accordingly, and commencing with the effectiveness of the IP License Agreement as of May 7, 2019, our Gaming business segment AEBITDA no longer benefited from these charges, while our SciPlay business segment AEBITDA increased proportionately. The total amount of such IP charges for the three and six months ended June 30, 2019 were $3 million and $10 million, respectively, and for the three and six months ended June 30, 2018 were $6 million and $13 million, respectively. The total amount of such IP charges for the years ended December 31, 2018 and 2017 were $26 million and $24 million, respectively.

• SciPlay Holding Company, LLC (“SciPlay Holding”), a subsidiary of SciPlay, entered into a $150 million revolving credit agreement (the “SciPlay Revolver”) that matures in May 2024 (see Note 11).

As a result of these transactions, we received $312 million in net proceeds from the offering (net of $30 million used by SciPlay to pay the Offering fees and balance retained for general corporate purposes), which enables us to make substantial payments to reduce our debt.

The noncontrolling interest share of equity in SciPlay is reflected as a component of the noncontrolling interest in the accompanying consolidated balance sheets and was $94 million as of June 30, 2019.

Significant Accounting Policies

There have been no changes to our significant accounting policies described within the Notes of our 2018 10-K other than adoption of ASC 842 described in Note 15.

Computation of Basic and Diluted Net Loss Per Share

Basic and diluted net loss per share were the same for all periods presented as all common stock equivalents would be anti-dilutive. We excluded 2 million of stock options from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2019 and 3 million of stock options from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2018. We excluded 3 million of RSUs from the calculation of diluted weighted-average common shares outstanding for both the three and six months ended June 30, 2019 and 2018.

New Accounting Guidance - Recently Adopted

The FASB issued ASU No. 2016-02, Leases (Topic 842) in 2016. ASU 2016-02 combined with all subsequent amendments (collectively, “ASC 842”) requires balance sheet recognition for all leases with a lease term greater than one year to be recorded as a lease liability (on a discounted basis) with a corresponding right-of-use asset. This guidance also expands the required quantitative and qualitative disclosures for lease arrangements and gives rise to other changes impacting certain

aspects of lessee and lessor accounting. We adopted ASC 842 as of January 1, 2019 using the optional transition method provided by ASU 2018-11, and applied both the lessee package of practical expedients and the available lessor practical expedients. During the first quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees and lessors from having to provide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases standard. We have provided the related transition disclosures as of the beginning of 2019 in accordance with ASU 2019-1. See our 2018 10-K Note 1 for the impact on our consolidated financial statements and Note 15 in this Quarterly Report for our lease accounting policy and the impact of our adoption of ASC 842.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard allows companies to make an election to reclassify from Accumulated Other Comprehensive Income (AOCI) to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. This ASU is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The amendments in this updated guidance should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. corporate federal income tax rate in the Tax Act is recognized. We adopted this standard effective January 1, 2019. We elected not to reclassify the income tax effects of the Tax Cuts and Jobs Act from AOCI to retained earnings. The adoption of this guidance did not have an effect on our consolidated financial statements.

New Accounting Guidance - Not Yet Adopted

The FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) in 2016. The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The new guidance will be effective for us beginning January 1, 2020. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of adopting this guidance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The new guidance will be effective for us beginning January 1, 2020, with early adoption permitted. We do not plan to early adopt this ASU, and we are currently evaluating the impact of adopting this guidance.

We do not expect that any other recently issued accounting guidance will have a significant effect on our consolidated financial statements.

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Revenue Recognition

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

The following table disaggregates revenues by type within each of our business segments:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Gaming
Gaming operations	$	150	$	160	$	302	$	321
Gaming machine sales	148		168		284		313
Gaming systems	67		84		141		159
Table products	62		59		122		121
Total	$	427	$	471	$	849	$	914
Lottery
Instant products	$	150	$	150	$	290	$	300
Lottery systems	81		57		168		109
Total	$	231	$	207	$	458	$	409
SciPlay
Mobile	$	98	$	77	$	195	$	149
Web and other	20		23		41		48
Total	$	118	$	100	$	236	$	197
Digital
Sports and platform	$	26	$	20	$	56	$	46
Gaming and other	43		47		83		91
Total	$	69	$	67	$	139	$	137

The amount of rental income revenue that is outside the scope of ASC 606 was $95 million and $191 million for the three and six months ended June 30, 2019, respectively, and $69 million and $136 million for the three and six months ended June 30, 2018, respectively.

Contract Liabilities and Other Disclosures

The following table summarizes the activity in our contract liabilities for the reporting period:

	Six Months Ended June 30,
	2019
Contract liability balance, beginning of period(1)	$	97
Liabilities recognized during the period	33
Amounts recognized in revenue from beginning balance	(30		)
Contract liability balance, end of period(1)	$	100
(1) Contract liabilities are included within Accrued liabilities and Other long-term liabilities in our June 30, 2019 consolidated balance sheet.

The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on our consolidated balance sheets. Other than contracts with customers with financing arrangements exceeding 12 months, revenue recognition is generally proximal to conversion to cash, except for Lottery instant products sold under POS contracts. Revenue is recognized for such contracts upon delivery to our customers, while conversion to cash is based on the retail sale of the underlying ticket to end consumers. As a result, for such contracts revenue recognition under ASC 606 does not approximate conversion to cash. Total revenue recognized under such contracts for the three and six months ended June 30, 2019 was $26 million and $49 million, respectively, and was $24 million and $58 million for the three and six months ended June 30, 2018, respectively. The following table summarizes our receivables and contract asset balances for the periods indicated (other than contract liabilities disclosed above):

	Receivables		Contract Assets(1)
Beginning of period balance	$	753	$	114
End of period balance, June 30, 2019	778		114
(1) Contract assets are included primarily within Prepaid expenses, deposits and other current assets in our June 30, 2019 consolidated balance sheet.

As of June 30, 2019, we did not have material unsatisfied performance obligations for contracts expected to be long-term or contracts for which we recognize revenue at an amount other than for which we have the right to invoice for goods or services delivered or performed.

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Business Segments

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Business Segments

Business Segments

We report our operations in four business segments—Gaming, Lottery, SciPlay (formerly referred to as our Social business segment) and Digital—representing our different products and services. A detailed discussion regarding the products and services from which each reportable business segment derives its revenue is included in Notes 2 and 3 in our 2018 10-K.

In evaluating financial performance, our Chief Operating Decision Maker focuses on AEBITDA as management’s segment measure of profit or loss, which is described in Note 3 in our 2018 10-K. As a result of the IPO of a minority interest in our Social gaming business, which was completed on May 7, 2019, we now refer to our Social business segment as our SciPlay business segment, and we also changed our calculation of SciPlay business segment AEBITDA beginning with the first quarter of 2019. SciPlay business segment AEBITDA now reflects intercompany charges settled in cash for corporate services and certain royalties paid for by our SciPlay business segment to other segments or to Corporate (included in the “Unallocated and Reconciling Items” column in the tables below). Business segment information for the three and six months ended June 30, 2018 has been recast to reflect these changes. Additionally, see Note 1 for a description of the IP License Agreement executed in conjunction with the SciPlay IPO that impacts our Gaming business segment and SciPlay business segment AEBITDA commencing with the effectiveness of the IP License Agreement as of May 7, 2019. The accounting policies of our business segments are the same as those described within the Notes in our 2018 10-K. The following tables present our segment information:

	Three Months Ended June 30, 2019
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	427		$	231		$	118		$	69		$	—		$	845
AEBITDA(2)	215			103			33			12			(28		)	$	335
Reconciling items to consolidated net loss before income taxes:
D&A	(114		)	(20		)	(2		)	(19		)	(15		)	(170		)
Restructuring and other	(2		)	(1		)	(1		)	(1		)	(1		)	(6		)
EBITDA from equity investments													(18		)	(18		)
Earnings from equity investments													7			7
Interest expense													(147		)	(147		)
Loss on debt refinancing transactions													(60		)	(60		)
Loss on remeasurement of debt													(3		)	(3		)
Other income, net													4			4
Stock-based compensation													(10		)	(10		)
Net loss before income taxes																$	(68	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.
(2) Gaming AEBITDA decreased and SciPlay AEBITDA increased compared to prior periods as the IP charges are no longer being allocated to SciPlay per the IP License Agreement discussed in Note 1. The three months ended June 30, 2019 includes $3 million in intellectual property royalties paid by the SciPlay business segment, which were terminated as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the three months ended June 30, 2018 were $6 million.

	Three Months Ended June 30, 2018
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	471		$	207		$	100		$	67		$	—		$	845
AEBITDA	236			99			23			13			(31		)	$	340
Reconciling items to consolidated net loss before income taxes:
D&A	(121		)	(14		)	(6		)	(17		)	(15		)	(173		)
Restructuring and other	(2		)	3			(1		)	(4		)	(30		)	(34		)
EBITDA from equity investments													(16		)	(16		)
Earnings from equity investments													5			5
Interest expense													(146		)	(146		)
Gain on remeasurement of debt													34			34
Other expense, net													(1		)	(1		)
Stock-based compensation													(15		)	(15		)
Net loss before income taxes																$	(6	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.

	Six Months Ended June 30, 2019
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	849		$	458		$	236		$	139		$	—		$	1,682
AEBITDA(2)	430			207			58			25			(57		)	$	663
Reconciling items to consolidated net loss before income taxes:
D&A	(226		)	(39		)	(4		)	(38		)	(28		)	(335		)
Restructuring and other	(4		)	(1		)	(2		)	(4		)	(2		)	(13		)
EBITDA from equity investments													(35		)	(35		)
Earnings from equity investments													13			13
Interest expense													(301		)	(301		)
Loss on debt refinancing transactions													(60		)	(60		)
Gain on remeasurement of debt													2			2
Other income, net													2			2
Stock-based compensation													(24		)	(24		)
Net loss before income taxes																$	(88	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.
(2) Gaming AEBITDA decreased and SciPlay AEBITDA increased compared to prior periods as the IP charges are no longer being allocated to SciPlay per the IP License Agreement discussed in Note 1. The six months ended June 30, 2019 includes $10 million in intellectual property royalties paid by the SciPlay business segment, which were terminated as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the six months ended June 30, 2018 were $13 million.

	Six Months Ended June 30, 2018
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	914		$	409		$	197		$	137		$	—		$	1,657
AEBITDA	454			193			46			30			(63		)	$	660
Reconciling items to consolidated net loss before income taxes:
D&A	(260		)	(28		)	(13		)	(33		)	(27		)	(361		)
Restructuring and other	(3		)	2			(19		)	(10		)	(56		)	(86		)
EBITDA from equity investments													(35		)	(35		)
Earnings from equity investments													12			12
Interest expense													(301		)	(301		)
Loss on debt financing transactions													(93		)	(93		)
Gain on remeasurement of debt													33			33
Other expense, net													(7		)	(7		)
Stock-based compensation													(24		)	(24		)
Net loss before income taxes																$	(202	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.

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Restructuring and other

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Restructuring and other

Restructuring and other

Restructuring and other includes charges or expenses attributable to: (i) employee severance; (ii) management restructuring and related costs; (iii) restructuring and integration; (iv) cost savings initiatives; (v) major litigation; and (vi) acquisition costs and other unusual items. The following table summarizes pre-tax restructuring and other costs for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Employee severance(1)	$	2	$	16	$	5	$	21
Acquisitions and related costs	—		—		—		8
Contingent consideration adjustment	2		—		2		18
Legal and related	—		10		—		26
Restructuring, integration and other	2		8		6		13
Total	$	6	$	34	$	13	$	86
(1) Includes employee severance and termination costs associated with restructuring and integration activities.

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Accounts and Notes Receivable and Credit Quality of Receivables

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Accounts and Notes Receivable and Credit Quality of Receivables

Accounts and Notes Receivable and Credit Quality of Receivables

Accounts and Notes Receivable

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

	June 30, 2019			December 31, 2018
Current:
Accounts receivable	$	629		$	615
Notes receivable	143			138
Allowance for doubtful accounts and notes	(36		)	(40		)
Current accounts and notes receivable, net	$	736		$	713
Long-term:
Notes receivable, net of allowance	42			40
Total accounts and notes receivable, net	$	778		$	753

Credit Quality of Receivables

The interest rates on our outstanding receivables bearing interest ranged from 3% to 10% at June 30, 2019 and December 31, 2018.

We have certain concentrations of outstanding accounts and notes receivable in international locations that impact our assessment of the credit quality of those receivables. We monitor the macroeconomic and political environment in each of these locations in our assessment of the credit quality of our receivables. We have not identified changes in the aforementioned factors during the six months ended June 30, 2019 that require a reassessment of our receivable balances. The international locations with significant concentrations (generally deemed to be exceeding 10%) of our notes receivable are as follows:

• Mexico - Our notes receivable, net, from certain customers in Mexico at June 30, 2019 was $25 million. We collected $16 million of outstanding receivables from these customers during the six months ended June 30, 2019.

• Peru - Our notes receivable, net, from certain customers in Peru at June 30, 2019 was $13 million. We collected $4 million of outstanding receivables from these customers during the six months ended June 30, 2019.

• Argentina - Our notes receivable, net, from customers in Argentina at June 30, 2019 was $22 million denominated in USD. Our customers are required to, and have continued to, pay us in pesos at the spot exchange rate on the date of payment. We collected $9 million of outstanding receivables from customers in Argentina during the six months ended June 30, 2019.

In addition to the macroeconomic and political factors noted above, we also evaluated recent 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.

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

	June 30, 2019			Balances over 90 days past due			December 31, 2018			Balances over 90 days past due
Notes receivable:
Domestic	$	71		$	12		$	55		$	6
International	114			23			123			25
Total notes receivable	185			35			178			31
Notes receivable allowance
Domestic	(5		)	(5		)	(6		)	(6		)
International	(18		)	(18		)	(18		)	(18		)
Total notes receivable allowance	(23		)	(23		)	(24		)	(24		)
Notes receivable, net	$	162		$	12		$	154		$	7

At June 30, 2019, 7% of our total notes receivable, net, was past due by over 90 days, compared to 4% at December 31, 2018.

We evaluate our exposure to credit loss on notes receivable on both a collective and individual basis. In addition, we evaluate such notes receivable on a geographic basis and take into account any other factors (such as general economic conditions, other macroeconomic considerations, etc.) that could impact our collectability of notes receivable individually or in the aggregate. Accordingly, notes receivable may be evaluated under multiple methodologies, and the resulting allowance is not determined based on one specific methodology taking all factors into consideration. The activity in our allowance for notes receivable for each of the six month periods ended June 30, 2019 and 2018 is as follows:

	Six Months Ended June 30,
	2019			2018
Beginning allowance for notes receivable	$	(24	)	$	(21	)
Provision	(3		)	(3		)
Charge-offs and recoveries	4			1
Ending allowance for notes receivable	$	(23	)	$	(23	)

The fair value of notes receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. As of June 30, 2019 and December 31, 2018, the fair value of notes receivable, net, approximated the carrying value due to contractual terms of notes receivable generally being under 24 months.

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Inventories

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consisted of the following as of the dates presented below:

	June 30, 2019		December 31, 2018
Parts and work-in-process	$	146	$	131
Finished goods	92		85
Total inventories	$	238	$	216

Parts and work-in-process include parts for gaming machines, lottery terminals and instant lottery ticket materials, as well as labor and overhead costs for work-in-process associated with the manufacturing of instant lottery games and lottery terminals. Our finished goods inventory primarily consists of gaming machines for sale, instant products primarily for our Participation arrangements and our licensed branded merchandise.

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Property and Equipment, net

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net    

Property and equipment, net consisted of the following:

	June 30, 2019			December 31, 2018
Land	$	20		$	15
Buildings and leasehold improvements	152			128
Gaming and lottery machinery and equipment	1,034			1,041
Furniture and fixtures	29			27
Construction in progress	21			17
Other property and equipment	251			240
Less: accumulated depreciation	(975		)	(921		)
Total property and equipment, net	$	532		$	547

Depreciation expense is excluded from Cost of services, Cost of product sales, Cost of instant products and Other operating expenses and is separately presented within D&A.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018(1)
Depreciation expense	$	64	$	55	$	122	$	127
(1) Includes assets held for sale impairment charges of $19 million.

During the second quarter of 2019, we reclassified the assets held for sale to assets held and used at the carrying amount of $27 million (reflecting an impairment charge of approximately $9 million recorded during the second quarter of 2019) due to the assets no longer meeting assets held for sale criteria.

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Intangible Assets, net and Goodwill

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets, net and Goodwill

Intangible Assets, net and Goodwill

Intangible Assets, net

The following tables present certain information regarding our intangible assets as of June 30, 2019 and December 31, 2018.

	June 30, 2019							December 31, 2018
	Gross Carrying Value		Accumulated Amortization			Net Balance		Gross Carrying Value		Accumulated Amortization			Net Balance
Amortizable intangible assets:
Customer relationships	$	1,084	$	(341	)	$	743	$	1,084	$	(299	)	$	785
Intellectual property	931		(512		)	419		931		(453		)	478
Licenses	547		(291		)	256		546		(253		)	293
Brand names	123		(65		)	58		123		(59		)	64
Trade names	107		(27		)	80		108		(23		)	85
Patents and other	24		(14		)	10		23		(13		)	10
	2,816		(1,250		)	1,566		2,815		(1,100		)	1,715
Non-amortizable intangible assets:
Trade names	96		(2		)	94		96		(2		)	94
Total intangible assets	$	2,912	$	(1,252	)	$	1,660	$	2,911	$	(1,102	)	$	1,809

 

The following reflects intangible amortization expense included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	75	$	76	$	152	$	153

Goodwill

In conjunction with integrating our recent Digital acquisitions, the implementation of ERP systems in the Digital segment and recent management changes, during the first quarter of 2019, in our Digital business segment, we reviewed our Digital operating segment in accordance with ASC 350 to determine if additional reporting units exist based on the availability of discrete financial information that is regularly reviewed by segment management. We determined that in our Digital operating segment we now have two reporting units: (1) Digital sports and platform and (2) Digital gaming and other. The change in the Digital business segment reporting units resulted in the allocation of the previous Digital reporting unit goodwill balance as follows: $230 million to the new Digital sports and platform reporting unit and $134 million to the new Digital gaming and other reporting unit, which allocation was determined based on the relative fair value approach prescribed by ASC 350. As a result of this change we now have ten reporting units: Instant Products, U.S. Lottery Systems, International Lottery Systems, SG Gaming, legacy U.K. Gaming, Casino Management Systems, Table Products, SciPlay, Digital sports and platform and Digital gaming and other.

The table below reconciles the change in the carrying value of goodwill by business segment for the period from

December 31, 2018 to June 30, 2019.

Goodwill	Gaming		Lottery			SciPlay		Digital		Totals
Balance as of December 31, 2018	$	2,449	$	352		$	115	$	364	$	3,280
Foreign currency adjustments	—		(1		)	—		—		(1		)
Balance as of June 30, 2019	$	2,449	$	351		$	115	$	364	$	3,279

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Software, net

6 Months Ended

Jun. 30, 2019

Capitalized Computer Software, Net [Abstract]

Software, net

Software, net

Software, net consisted of the following:

	June 30, 2019			December 31, 2018
Software	$	1,146		$	1,101
Accumulated amortization	(881		)	(816		)
Software, net	$	265		$	285

The following reflects amortization of software included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	31	$	42	$	61	$	81

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Equity Investments

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Equity Investments

Equity Investments

Equity investments totaled $273 million and $298 million as of June 30, 2019 and December 31, 2018, respectively. We received distributions and dividends totaling $40 million and $42 million during the six months ended June 30, 2019 and 2018, respectively, primarily related to our LNS equity investment.

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Long-Term and Other Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-Term and Other Debt

Long-Term and Other Debt

2026 Unsecured Notes

On March 19, 2019, SGI issued $1,100 million in aggregate principal amount of its new 2026 Unsecured Notes at an issue price of 100.000% in a private offering. We used the net proceeds of the 2026 Unsecured Notes offering to redeem $1,000 million of our outstanding 2022 Unsecured Notes and pay accrued and unpaid interest thereon plus related premiums, fees, and costs, which redemption was completed on April 4, 2019, and paid related fees and expenses of the 2026 Unsecured Notes offering.

The 2026 Unsecured Notes were issued pursuant to an indenture dated as of March 19, 2019 (the “2026 Unsecured Notes Indenture”). SGI may redeem some or all of the 2026 Unsecured Notes at any time prior to March 15, 2022 at a redemption price equal to 100% of the principal amount of the 2026 Unsecured Notes plus accrued and unpaid interest, if any, to the date of the redemption plus a “make whole” premium. SGI may redeem some or all of the 2026 Unsecured Notes at any time on or after March 15, 2022 at the prices specified in the 2026 Unsecured Notes Indenture.

The 2026 Unsecured Notes are senior unsecured obligations of SGI, rank equally to all SGI’s existing and future senior debt and rank senior to all of SGI’s existing and future senior subordinated debt. The 2026 Unsecured Notes are guaranteed on a senior unsecured basis by SGC and all of its wholly owned U.S. subsidiaries (other than SGI, the unrestricted business entities comprising our SciPlay business segment and certain immaterial subsidiaries). The 2026 Unsecured Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

In connection with the 2026 Unsecured Notes offering, we reflected $16 million in financing costs presented primarily as a reduction to long-term debt.

SciPlay Revolver

SciPlay Holding, a subsidiary of SciPlay, entered into the SciPlay Revolver, a $150 million revolving credit agreement that matures in May 2024, by and among SciPlay Holding, as the borrower, SciPlay Parent LLC, as a guarantor, the subsidiary guarantors party thereto (which are all domestic entities that comprise our SciPlay business segment), the lenders party thereto

and Bank of America, N.A., as administrative agent and collateral agent. The interest rate is either Adjusted LIBOR (as defined in the SciPlay Revolver) plus 2.250% (with one 0.250% leverage-based step-down to the margin and one 0.250% leverage-based step-up to the margin) or ABR (as defined in the SciPlay Revolver) plus 1.250% (with one 0.250% leverage-based step-down to the margin and one 0.250% leverage-based step-up to the margin) at the option of SciPlay Holding. SciPlay Holding is required to pay to the lenders a commitment fee of 0.500% per annum on the average daily unused portion of the revolving commitments through maturity, which fee varies based on the total net leverage ratio and is subject to a floor of 0.375%. The SciPlay Revolver provides for up to $15 million in letter of credit issuances, which requires customary issuance and administration fees, and a fronting fee of 0.125%.

The SciPlay Revolver contains covenants that, among other things, restricts SciPlay’s ability to incur additional indebtedness; incur liens; sell, transfer or dispose of property and assets; invest; make dividends or distributions or other restricted payments; and engage in affiliate transactions, with the exception of certain payments under the TRA and payments in respect of certain tax distributions and intercompany services under the SciPlay Parent LLC Operating Agreement.

In addition, the SciPlay Revolver requires that SciPlay maintain a maximum total net leverage ratio not to exceed 2.50:1.00 and maintain a minimum fixed charge coverage ratio of no less than 4.00:1.00. The SciPlay Revolver is secured by a (i) first priority pledge of the equity securities of SciPlay Holding, SciPlay Parent LLC’s restricted subsidiaries and each subsidiary guarantor party thereto and (ii) first priority security interests in, and mortgages on, substantially all tangible and intangible personal property and material fee-owned real property of SciPlay Parent LLC, SciPlay Holding and each subsidiary guarantor party thereto, in each case, subject to customary exceptions.

Outstanding Debt and Finance Leases

The following table reflects our outstanding debt:

	As of
	June 30, 2019										December 31, 2018
	Final Maturity	Rate(s)	Face value		Unamortized debt discount/premium and deferred financing costs, net			Book value			Book value
Senior Secured Credit Facilities:
Revolver	2020	variable	$	45	$	—		$	45		$	325
Term Loan B-5	2024	variable	4,122		(66		)	4,056			4,071
SciPlay Revolver	2024	variable	—		—			—			—
Senior Notes:
2025 Secured Notes(2)	2025	5.000%	1,250		(16		)	1,234			1,233
2026 Secured Euro Notes(3)	2026	3.375%	370		(5		)	365			367
2022 Unsecured Notes	2022	10.000%	1,200		(11		)	1,189			2,176
2026 Unsecured Euro Notes(3)	2026	5.500%	285		(4		)	281			282
2026 Unsecured Notes	2026	8.250%	1,100		(15		)	1,085			—
Subordinated Notes:
2020 Notes	2020	6.250%	244		(1		)	243			242
2021 Notes	2021	6.625%	341		(3		)	338			337
Finance lease obligations as of June 30, 2019 payable monthly through 2019 and other(4)	2019	3.900%	11		—			11			4
Total long-term debt outstanding			$	8,968	$	(121	)	$	8,847		$	9,037
Less: current portion of long-term debt								(45		)	(45		)
Long-term debt, excluding current portion								$	8,802		$	8,992
Fair value of debt(1)			$	9,066

(1) Fair value of our fixed rate and variable interest rate debt is classified within level 2 in the fair value hierarchy and has been calculated based on the quoted market prices of our securities.

(2) Includes cross-currency interest rate swap agreements that we entered into in 2018 in the amount of $460 million U.S. Dollar-denominated 2025 Secured Notes to a fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946% (see Note 16 in our 2018 10-K).

(3) We designated a portion of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the change in foreign currency exchange rates of the Euro relative to the U.S. Dollar (see Note 12 for additional information). The total change in the face value of the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes due to changes in foreign currency exchange rates since the issuance was a reduction of $58 million, of which a $3 million loss and a $2 million gain were recognized on remeasurement of debt in the Consolidated Statements of Operations for the three and six months ended June 30, 2019, respectively.

(4) Includes $10 million related to certain revenue transactions presented as debt in accordance with ASC 470.

We were in compliance with the financial covenants under all debt agreements as of June 30, 2019.

For additional information regarding the terms of our credit agreements, Secured Notes, Unsecured Notes and Subordinated Notes, see Note 16 in our 2018 10-K.

Loss on Debt Financing Transactions

The following are components of the loss on debt financing transactions resulting from debt extinguishment and modification accounting for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Repayment and cancellation of principal balance at premium	$	50	$	—	$	50	$	110
Unamortized debt (premium) discount and deferred financing costs, net	10		—		10		(30		)
Third party debt issuance fees	—		—		—		13
Total loss on debt financing transactions	$	60	$	—	$	60	$	93

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Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value Measurements

Fair Value Measurements

The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments, which are principally cash and cash equivalents, restricted cash, accounts receivable, other current assets, accounts payable and accrued liabilities, approximates their recorded values. Our assets and liabilities measured at fair value on a recurring basis are described below.

Derivative Financial Instruments

We record derivative financial instruments on the balance sheet at their respective fair values. As of June 30, 2019, we held the following derivative instruments that were accounted for pursuant to ASC 815:

Interest Rate Swap Contracts

We currently use interest rate swap contracts as described below to mitigate gains or losses associated with the change in expected cash flows due to fluctuations in interest rates on our variable rate debt.

In February 2018, we entered into interest rate swap contracts to hedge a portion of our interest expense associated with our variable rate debt to effectively fix the interest rate that we pay. These interest rate swap contracts are designated as cash flow hedges under ASC 815. We pay interest at a weighted-average fixed rate of 2.4418% and receive interest at a variable rate equal to one-month LIBOR. The total notional amount of interest rate swaps outstanding was $800 million as of June 30, 2019. These hedges mature in February 2022.

These hedges are highly effective in offsetting changes in our future expected cash flows due to the fluctuation in the one-month LIBOR rate associated with our variable rate debt. We qualitatively monitor the effectiveness of these hedges on a quarterly basis. As a result of the effective matching of the critical terms on our variable rate interest expense being hedged to the hedging instruments being used, we expect these hedges to remain highly effective.

All gains and losses from these hedges are recorded in Other comprehensive income (loss) until the future underlying payment transactions occur. Any realized gains or losses resulting from the hedges are recognized (together with the hedged transaction) as interest expense. We estimate the fair value of our interest rate swap contracts by discounting the future cash

flows of both the fixed rate and variable rate interest payments based on market yield curves. The inputs used to measure the fair value of our interest rate swap contracts are categorized as Level 2 in the fair value hierarchy as established by ASC 820.

The following table shows the gains (loss) and interest expense recognized on our interest rate swap contracts:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
(Loss) gain recorded in accumulated other comprehensive loss, net of tax	$	(11	)	$	4	$	(16	)	$	6
Interest expense recorded related to interest rate swap contracts	—			1		—			2

We do not expect to reclassify material amounts from Accumulated other comprehensive income (loss) to interest expense in the next twelve months.

The following table shows the effect of interest rate swap contracts designated as cash flow hedges on the consolidated statements of operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	Interest expense						Interest expense
Total interest expense which reflects the effects of cash flow hedges	$	(147	)	$	(146	)	$	(301	)	$	(301	)
Hedged item	(5		)	(5		)	(10		)	(7		)
Derivative designated as hedging instrument	5			4			10			5

Cross-Currency Interest Rate Swaps

In connection with the February 2018 Refinancing described in Note 16 of our 2018 10-K, we entered into certain cross-currency interest rate swap agreements to achieve more beneficial interest rates by effectively converting $460 million of our fixed-rate U.S. Dollar-denominated 2025 Secured Notes, including the semi-annual interest payments through October 2023, to fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946%. We have designated these cross-currency interest rate swap agreements as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar.

We use the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the fair value of the $460 million cross-currency interest rate swaps is reported in foreign currency translation gain (loss) in Accumulated other comprehensive income (loss). The cross-currency basis spread (along with other components of the cross-currency swap’s fair value excluded from the spot method effectiveness assessment) are amortized and recorded to interest expense. We evaluate the effectiveness of our net investment hedge at the beginning of each quarter.

The following table shows the fair value of our hedges:

	Balance Sheet Line Item	June 30, 2019		December 31, 2018
Interest rate swaps (1)(3)	Other liabilities	$	17	$	—
Cross-currency interest rate swaps (2)(3)	Other assets	29		18
(1) Losses of $11 million and $17 million for the three and six months ended June 30, 2019, respectively, are reflected in Derivative financial instrument unrealized (loss) gain in Other comprehensive loss.
(2) Loss of $5 million and gain of $11 million for the three and six months ended June 30, 2019, respectively, are reflected in Foreign currency translation gain (loss) in Other comprehensive loss.
(3) Inputs used to measure the fair value of our interest rate swap contracts are categorized as Level 2 in the fair value hierarchy.

Net Investment Non-derivative Hedge - 2026 Secured Euro Notes

We designated $270 million of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our results caused by the changes in foreign currency exchange rates of the Euro relative to the U.S. Dollar.

We use the spot method to measure the effectiveness of our net investment non-derivative hedge. Under this method, for each reporting period, the change in the hedged portion of the carrying value of the 2026 Secured Euro Notes due to remeasurement is reported in Foreign currency translation gain (loss) in Other comprehensive loss, and the remaining remeasurement change is recognized in Gain (loss) on remeasurement of debt in our consolidated statements of operations. We evaluate the effectiveness of our net investment non-derivative hedge at the beginning of each quarter, and the inputs used to measure the fair value of this non-derivative hedge are categorized as Level 2 in the fair value hierarchy.

Contingent Consideration Liabilities

In connection with our 2017 acquisitions, we have recorded certain contingent consideration liabilities, of which the values are primarily based on reaching certain earnings-based metrics. The related liabilities were recorded at fair value on the acquisition date as part of the consideration transferred and are remeasured each reporting period. The inputs used to measure the fair value of our liabilities are categorized as Level 3 in the fair value hierarchy.

Contingent consideration liabilities as of June 30, 2019 are $22 million of which $10 million is included in Accrued liabilities with the remainder included in Other long-term liabilities. Contingent consideration liabilities as of December 31, 2018 were $45 million of which $22 million was included in Accrued liabilities with the remainder included in Other long-term liabilities.

We did not have assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2019 other than disclosed in Note 7.

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Stockholders' Deficit

6 Months Ended

Jun. 30, 2019

Compensation Related Costs [Abstract]

Stockholders' Deficit

Stockholders’ Deficit

Changes in Stockholders’ Deficit

The following tables present certain information regarding our stockholders’ deficit as of June 30, 2019 and June 30, 2018:

	Common Stock		Additional Paid in Capital		Accumulated Loss			Treasury Stock			Accumulated Other Comprehensive Loss			Noncontrolling Interest		Total
January 1, 2019	$	1	$	835	$	(2,824	)	$	(175	)	$	(300	)	$	—	$	(2,463	)
Net proceeds of common stock in connection with stock options and RSUs	—		2		—			—			—			—		2
Stock-based compensation	—		11		—			—			—			—		11
Net loss	—		—		(24		)	—			—			—		(24		)
Other comprehensive income	—		—		—			—			51			—		51
March 31, 2019	$	1	$	848	$	(2,848	)	$	(175	)	$	(249	)	$	—	$	(2,423	)
Net proceeds of common stock in connection with stock options and RSUs and other	—		2		—			—			—					2
Sale of SciPlay common stock and related transactions	—		328		—			—			—			91		419
Stock-based compensation	—		9		—			—			—			1		10
Net loss	—		—		(77		)	—			—			2		(75		)
Other comprehensive loss	—		—		—			—			(51		)	—		(51		)
June 30, 2019	$	1	$	1,187	$	(2,925	)	$	(175	)	$	(300	)	$	94	$	(2,118	)

	Common Stock		Additional Paid in Capital			Accumulated Loss			Treasury Stock			Accumulated Other Comprehensive Loss			Total
January 1, 2018	$	1	$	808		$	(2,461	)	$	(175	)	$	(200	)	$	(2,027	)
Net proceeds of common stock in connection with stock options and RSUs	—		(15		)	—			—			—			(15		)
Stock-based compensation	—		7			—			—			—			7
Net loss	—		—			(202		)	—			—			(202		)
Adoption impact of ASC 606	—		—			(11		)	—			—			(11		)
Other Comprehensive income	—		—			—			—			52			52
March 31, 2018	$	1	$	800		$	(2,674	)	$	(175	)	$	(148	)	$	(2,196	)
Net proceeds of common stock in connection with stock options and RSUs	—		2			—			—			—			2
Stock-based compensation	—		15			—			—			—			15
Net loss	—		—			(6		)	—			—			(6		)
Other Comprehensive loss	—		—			—			—			(83		)	(83		)
June 30, 2018	$	1	$	817		$	(2,680	)	$	(175	)	$	(231	)	$	(2,268	)

SciPlay Stock Based Compensation

During the second quarter of 2019, SciPlay adopted the SciPlay Long-Term Incentive Plan (“SciPlay LTIP”). The SciPlay LTIP authorizes the issuance of up to 6.5 million shares of SciPlay’s Class A common stock to be granted in connection with awards of incentive and nonqualified stock options, restricted stock and stock units, stock appreciation rights and performance-based awards. As of June 30, 2019, there were 3.4 million of total time-based and performance-based SciPlay restricted stock units issued with an average grant price of $16.00 per share.

The following reflects total stock-based compensation expense recognized under all programs:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Related to SGC stock options	$	1	$	7	$	3	$	8
Related to SGC RSUs	5		8		17		16
Related to SciPlay RSUs	4		—		4		—
Total	$	10	$	15	$	24	$	24

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We consider new evidence (both positive and negative) at each reporting date that could affect our view of the future realization of deferred tax assets. Based upon the evaluation of all available evidence, and considering the projected U.S. pre-tax losses for 2019, we maintain a valuation allowance for certain of our U.S. operations as of June 30, 2019. We maintained other valuation allowances for certain non-U.S. jurisdictions with cumulative losses.

The effective income tax rates for the three and six months ended June 30, 2019 were (10)% and (13)%, respectively, and 0% and (3%) for the three and six months ended June 30, 2018, respectively, and were determined using an estimated annual effective tax rate after considering any discrete items for such periods. Due to the aforementioned valuation allowance against certain U.S. net deferred tax assets, the effective tax rates for the three and six months ended June 30, 2019 and 2018 do not include the benefits of the U.S. tax losses, and we recorded an overall tax expense in both periods due to foreign pre-tax earnings. The change in the effective tax rates relates primarily to the overall mix of income in our foreign jurisdictions.

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

On January 1, 2019, we adopted ASC 842 using the optional transition method provided by ASU 2018-11. Our operating leases primarily consist of real estate leases such as offices, warehouses, and research and development facilities. Our leases have remaining lease terms ranging from 1 year to 11 years, some of which include options to extend the leases for up to 5 years or to terminate the leases within 1 year. Our finance leases are immaterial.

Our total operating lease expenses for the three and six months ended June 30, 2019 were $10 million and $19 million, respectively, and were $8 million and $15 million for the three and six months ended June 30, 2018, respectively. The total amount of variable and short term lease payments were immaterial for all periods presented.

Supplemental balance sheet and cash flow information related to operating leases is as follows:

	June 30, 2019
Operating lease right-of-use assets	$	113
Accrued liabilities	26
Operating lease liabilities	95
Total operating lease liabilities	$	121
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	5
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases for the six months period	$	17
Weighted average remaining lease term, years	6
Weighted average discount rate	5		%

Lease liability maturities:

	Remainder of 2019		2020		2021		2022		2023		Thereafter		Less Imputed Interest			Total
Operating leases	$	16	$	30	$	25	$	19	$	16	$	34	$	(19	)	$	121

As of June 30, 2019, we did not have material additional operating leases that have not yet commenced.

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Litigation

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

We are involved in various routine and other specific legal proceedings, including the following which are described in Note 22 within our 2018 10-K: Colombia litigation, SNAI litigation, Washington State Matter, and the Raqqa Matter. There have been no material changes to these matters since the 2018 10-K was filed with the SEC, except as described below.

We record an accrual for legal contingencies when it is both probable that a liability has been incurred and the amount or range of the loss can be reasonably estimated (although, as discussed below, there may be an exposure to loss in excess of the accrued liability). We evaluate our accruals for legal contingencies at least quarterly and, as appropriate, establish new accruals or adjust existing accruals to reflect (1) the facts and circumstances known to us at the time, including information regarding negotiations, settlements, rulings and other relevant events and developments, (2) the advice and analyses of counsel and (3) the assumptions and judgment of management. Legal costs associated with our legal proceedings are expensed as incurred. We had accrued liabilities of $3 million and $4 million for all of our legal matters that were contingencies as of June 30, 2019 and December 31, 2018, respectively.

Substantially all of our legal contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss involves a series of complex judgments about future events. Consequently, the ultimate outcomes of our legal contingencies could result in losses in excess of amounts we have accrued. We may be unable to estimate a range of possible losses for some matters pending against us or our subsidiaries, even when the amount of damages claimed against us or our subsidiaries is stated because, among other things: (1) the claimed amount may be exaggerated or unsupported; (2) the claim may be based on a novel legal theory or involve a large number of parties; (3) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (4) there may be uncertainty as to the outcome of pending appeals or motions; (5) the matter may not have progressed sufficiently through discovery or there may be significant factual or legal issues to be resolved or developed; and/or (6) there may be uncertainty as to the enforceability of legal judgments and outcomes in certain jurisdictions. Other matters have progressed sufficiently that we are able to estimate a range of possible loss. For those legal contingencies disclosed in Note 22 in our 2018 10-K and this Note 16 as well as those related to the previously disclosed settlement agreement entered into in February 2015 with SNAI S.p.a., as to which a loss is reasonably possible, whether in excess of a related accrued liability or where there is no accrued liability, and for which we are able to estimate a range of possible loss, the current estimated range is up to approximately $14 million in

excess of the accrued liabilities (if any) related to those legal contingencies. This aggregate range represents management’s estimate of additional possible loss in excess of the accrued liabilities (if any) with respect to these matters based on currently available information, including any damages claimed by the plaintiffs, and is subject to significant judgment and a variety of assumptions and inherent uncertainties. For example, at the time of making an estimate, management may have only preliminary, incomplete, or inaccurate information about the facts underlying a claim; its assumptions about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse parties, regulators, indemnitors or co‑defendants, may prove to be wrong; and the outcomes it is attempting to predict are often not amenable to the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that management had not accounted for in its estimate because it had considered that outcome to be remote. Furthermore, as noted above, the aggregate range does not include any matters for which we are not able to estimate a range of possible loss. Accordingly, the estimated aggregate range of possible loss does not represent our maximum loss exposure. Any such losses could have a material adverse impact on our results of operations, cash flows or financial condition. The legal proceedings underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate.

TCS John Huxley Matter

On March 15, 2019, TCS John Huxley America, Inc., TCS John Huxley Europe Ltd., TCS John Huxley Asia Ltd., and Taiwan Fulgent Enterprise Co., Ltd. brought a civil action in the United States District Court for the Northern District of Illinois against SGC, Bally Technologies, Inc. and Bally Gaming, Inc. In the complaint, the plaintiffs assert federal antitrust claims arising from the defendants’ procurement of particular U.S. and South African patents. The plaintiffs allege that the defendants used those patents to create an allegedly illegal monopoly in the market for automatic card shufflers sold to regulated casinos in the United States. On April 10, 2019, the defendants filed a motion to dismiss the plaintiffs’ complaint with prejudice. On April 25, 2019, the district court denied the defendants’ motion to dismiss without prejudice pursuant to the court’s local rules, after the plaintiffs advised that they intended to file an amended complaint. The plaintiffs filed their amended complaint on May 3, 2019, and on May 22, 2019, the defendants filed a motion to dismiss the plaintiffs’ amended complaint with prejudice, which has not yet been ruled upon by the district court. We are currently unable to determine the likelihood of an outcome or estimate a range of reasonably possible loss.

For additional information regarding our pending litigation matters, see Note 22 in our 2018 10-K.

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Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

6 Months Ended

Jun. 30, 2019

Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries [Abstract]

Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

We conduct substantially all of our business through our U.S. and foreign subsidiaries. As of June 30, 2019, SGI’s obligations under the Secured Notes (other than the 2022 Secured Notes, which were redeemed in March 2018), the Unsecured Notes and the Subordinated Notes were fully and unconditionally and jointly and severally guaranteed by SGC and the Guarantor Subsidiaries other than SGI, and certain immaterial subsidiaries of SGC. The guarantees of our Secured Notes (other than the 2022 Secured Notes, which were redeemed in March 2018), Unsecured Notes and Subordinated Notes will terminate under the following customary circumstances: (1) the sale or disposition of the capital stock of the guarantor (including by consolidation or merger of the guarantor into another person); (2) the liquidation or dissolution of the guarantor; (3) the defeasance or satisfaction and discharge of the notes; (4) the release of the guarantor from any guarantees of indebtedness of SGC and SGI; and (5) the proper designation of the guarantor as an unrestricted subsidiary pursuant to the indenture governing the respective notes.

Presented below is condensed consolidating financial information for (1) SGC, (2) SGI, (3) the Guarantor Subsidiaries and (4) the Non-Guarantor Subsidiaries as of June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018. The condensed consolidating financial information has been presented to show the nature of assets held, results of operations and cash flows of SGC, SGI, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming the current guarantee structures of the Secured Notes (other than the 2022 Secured Notes, which were redeemed in March 2018), the Unsecured Notes and the Subordinated Notes were in effect at the beginning of the periods presented.

     The condensed consolidating financial information reflects the investments of SGC in SGI and in the Guarantor Subsidiaries and Non-Guarantor Subsidiaries using the equity method of accounting. They also reflect the investments of the Guarantor Subsidiaries in the Non-Guarantor Subsidiaries. Net changes in intercompany due from/due to accounts are reported in the accompanying Supplemental Condensed Consolidating Statements of Cash Flows as investing activities if the applicable entities have a net investment (asset) in intercompany accounts and as a financing activity if the applicable entities have a net intercompany borrowing (liability) balance.    

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	235		$	—		$	—	$	141	$	(7	)	$	369
Restricted cash	—			1			35		8		—			44
Accounts receivable, net	—			100			195		321		—			616
Notes receivable, net	—			—			104		16		—			120
Inventories	—			47			99		103		(11		)	238
Prepaid expenses, deposits and other current assets	—			61			61		75		1			198
Property and equipment, net	34			96			231		204		(33		)	532
Operating lease right-of-use asset	1			25			33		54		—			113
Investment in subsidiaries	3,136			1,163			1,427		—		(5,726		)	—
Goodwill	—			240			1,897		1,142		—			3,279
Intangible assets, net	37			34			1,186		403		—			1,660
Intercompany balances	—			5,868			67		—		(5,935		)	—
Software, net	48			36			109		72		—			265
Other assets(2)	95			419			41		376		(433		)	498
Total assets	$	3,586		$	8,090		$	5,485	$	2,915	$	(12,144	)	$	7,932
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	$	—		$	42		$	2	$	1	$	—		$	45
Other current liabilities	52			173			242		255		(34		)	688
Long-term debt, excluding current portion	—			8,793			8		1		—			8,802
Operating lease liabilities	1			21			28		45		—			95
Other long-term liabilities	96			23			605		168		(472		)	420
Intercompany balances	5,649			—			—		286		(5,935		)	—
Total SGC stockholders’ (deficit) equity	(2,212		)	(962		)	4,600		2,065		(5,703		)	(2,212		)
Noncontrolling interest	—			—			—		94		—			94
Total liabilities and total stockholders’ (deficit) equity	$	3,586		$	8,090		$	5,485	$	2,915	$	(12,144	)	$	7,932
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Includes $11 million and $1 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	74		$	1		$	—	$	94	$	(1	)	$	168
Restricted cash	—			1			32		6		—			39
Accounts receivable, net	—			79			205		315		—			599
Notes receivable, net	—			—			101		13		—			114
Inventories	—			40			82		111		(17		)	216
Prepaid expenses, deposits and other current assets	6			63			92		72		—			233
Property and equipment, net	31			112			219		218		(33		)	547
Investment in subsidiaries	2,836			975			1,093		—		(4,904		)	—
Goodwill	—			240			1,897		1,143		—			3,280
Intangible assets, net	43			34			1,291		441		—			1,809
Intercompany balances	—			6,054			—		—		(6,054		)	—
Software, net	58			39			128		60		—			285
Other assets(2)	110			404			46		308		(440		)	428
Total assets	$	3,158		$	8,042		$	5,186	$	2,781	$	(11,449	)	$	7,718
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	$	—		$	42		$	—	$	3	$	—		$	45
Other current liabilities	64			162			248		254		(26		)	702
Long-term debt, excluding current portion	—			8,991			—		1		—			8,992
Other long-term liabilities	106			8			637		172		(481		)	442
Intercompany balances	5,451			—			49		554		(6,054		)	—
Total SGC stockholders’ (deficit) equity	(2,463		)	(1,161		)	4,252		1,797		(4,888		)	(2,463		)
Total liabilities and total stockholders’ (deficit) equity	$	3,158		$	8,042		$	5,186	$	2,781	$	(11,449	)	$	7,718
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes.
(2) Includes $12 million and $1 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	147		$	358		$	407		$	(67	)	$	845
Cost of services, cost of product sales and cost of instant products(2)	—			94			108			176			(57		)	321
SG&A	31			9			48			94			(8		)	174
R&D	—			1			19			26			—			46
D&A	12			13			104			45			(4		)	170
Restructuring and other	1			1			1			3			—			6
Operating (loss) income	(44		)	29			78			63			2			128
Interest expense	—			(147		)	—			—			—			(147		)
Loss on debt financing transactions	—			(60		)	—			—			—			(60		)
Loss on remeasurement of debt	—			(3		)	—			—			—			(3		)
Other income (expense), net	16			131			(119		)	(14		)	—			14
Net (loss) income before equity in income of subsidiaries and income taxes	(28		)	(50		)	(41		)	49			2			(68		)
Equity in (loss) income of subsidiaries	(30		)	2			12			—			16			—
Income tax (expense) benefit	(19		)	14			9			(11		)	—			(7		)
Net (loss) income	(77		)	(34		)	(20		)	38			18			(75		)
Less: Net income attributable to noncontrolling interest	—			—			—			2			—			2
Net (loss) income attributable to SGC	$	(77	)	$	(34	)	$	(20	)	$	36		$	18		$	(77	)
Net (loss) income	$	(77	)	$	(34	)	$	(20	)	$	38		$	18		$	(75	)
Other comprehensive loss	(51		)	(15		)	(3		)	(66		)	84			(51		)
Total comprehensive loss	(128		)	(49		)	(23		)	(28		)	102			(126		)
Less: comprehensive income attributable to noncontrolling interest	—			—			—			2			—			2
Comprehensive loss attributable to SGC	$	(128	)	$	(49	)	$	(23	)	$	(30	)	$	102		$	(128	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Excludes D&A.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	136		$	405		$	376		$	(72	)	$	845
Cost of services, cost of product sales and cost of instant products (2)	—			86			132			159			(61		)	316
SG&A	44			9			51			83			(13		)	174
R&D	—			1			22			26			—			49
D&A	12			7			107			50			(3		)	173
Restructuring and other	30			(3		)	2			5			—			34
Operating (loss) income	(86		)	36			91			53			5			99
Interest expense	—			(146		)	—			—			—			(146		)
Gain on remeasurement of debt	—			34			—			—			—			34
Other income (expense), net	17			132			(119		)	(23		)	—			7
Net (loss) income before equity in income of subsidiaries and income taxes	(69		)	56			(28		)	30			5			(6		)
Equity in income (loss) of subsidiaries	26			13			(17		)	—			(22		)	—
Income tax benefit (expense)	37			(26		)	(4		)	(7		)	—			—
Net (loss) income	$	(6	)	$	43		$	(49	)	$	23		$	(17	)	$	(6	)
Other comprehensive (loss) income	(83		)	30			(36		)	(119		)	125			(83		)
Comprehensive (loss) income	$	(89	)	$	73		$	(85	)	$	(96	)	$	108		$	(89	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes. (2) Excludes D&A.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Six Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	305		$	716		$	792		$	(131	)	$	1,682
Cost of services, cost of product sales and cost of instant products(2)	—			195			210			328			(105		)	628
SG&A	66			20			107			188			(21		)	360
R&D	—			2			42			51			—			95
D&A	24			25			203			92			(9		)	335
Restructuring and other	2			1			3			7			—			13
Operating (loss) income	(92		)	62			151			126			4			251
Interest expense	—			(301		)	—			—			—			(301		)
Loss on debt financing transactions	—			(60		)	—			—			—			(60		)
Gain on remeasurement of debt	—			2			—			—			—			2
Other income (expense), net	36			263			(243		)	(36		)	—			20
Net (loss) income before equity in income of subsidiaries and income taxes	(56		)	(34		)	(92		)	90			4			(88		)
Equity in (loss) income of subsidiaries	(24		)	9			23			—			(8		)	—
Income tax (expense) benefit	(21		)	9			22			(21		)	—			(11		)
Net (loss) income	(101		)	(16		)	(47		)	69			(4		)	(99		)
Less: Net income attributable to noncontrolling interest	—			—			—			2			—			2
Net (loss) income attributable to SGC	$	(101	)	$	(16	)	$	(47	)	$	67		$	(4	)	$	(101	)
Net (loss) income	$	(101	)	$	(16	)	$	(47	)	$	69		$	(4	)	$	(99	)
Other comprehensive (loss) income	—			(6		)	(1		)	5			2			—
Total comprehensive loss	(101		)	(22		)	(48		)	74			(2		)	(99		)
Less: comprehensive income attributable to noncontrolling interest	—			—			—			2			—			2
Comprehensive (loss) income attributable to SGC	$	(101	)	$	(22	)	$	(48	)	$	72		$	(2	)	$	(101	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Excludes D&A.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Six Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	266		$	792		$	745		$	(146	)	$	1,657
Cost of services, cost of product sales and cost of instant products (2)	—			172			250			313			(122		)	613
SG&A	82			20			109			162			(27		)	346
R&D	—			1			45			57			—			103
D&A	21			15			233			98			(6		)	361
Restructuring and other	56			(2		)	3			29			—			86
Operating (loss) income	(159		)	60			152			86			9			148
Interest expense	—			(301		)	—			—			—			(301		)
Loss on debt financing transactions	—			(93		)	—			—			—			(93		)
Gain on remeasurement of debt	—			33			—			—			—			33
Other income (expense), net	33			269			(252		)	(39		)	—			11
Net (loss) income before equity in income of subsidiaries and income taxes	(126		)	(32		)	(100		)	47			9			(202		)
Equity in (loss) income of subsidiaries	(58		)	17			(7		)	—			48			—
Income tax (expense) benefit	(24		)	8			21			(11		)	—			(6		)
Net (loss) income	$	(208	)	$	(7	)	$	(86	)	$	36		$	57		$	(208	)
Other comprehensive (loss) income	(31		)	12			(13		)	(46		)	47			(31		)
Comprehensive (loss) income	$	(239	)	$	5		$	(99	)	$	(10	)	$	104		$	(239	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes. (2) Excludes D&A.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(35	)	$	55		$	101		$	147		$	(6	)	$	262
Cash flows from investing activities:
Capital expenditures	(9		)	(16		)	(56		)	(51		)	—			(132		)
Distributions of capital from equity investments	—			—			—			18			—			18
Additions to equity method investments	—			(1		)	—			—			—			(1		)
Other, principally change in intercompany investing activities	—			228			(52		)	—			(176		)	—
Net cash (used in) provided by investing activities	(9		)	211			(108		)	(33		)	(176		)	(115		)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	—			(251		)	—			(2		)	—			(253		)
Payments of debt issuance and deferred financing costs	—			(14		)	—			(1		)	—			(15		)
Payments on license obligations	(13		)	—			—			—			—			(13		)
Sale of future revenue	—			—			11			—			—			11
Net proceeds from the sale of SciPlay common stock	—			—			—			342			—			342
Payments of deferred SciPlay common stock offering costs	—			—			—			(8		)	—			(8		)
Net redemptions of common stock under stock-based compensation plans and other	(1		)	(2		)	(2		)	(2		)	—			(7		)
Other, principally change in intercompany financing activities	219			—			—			(395		)	176			—
Net cash provided by (used in) financing activities	205			(267		)	9			(66		)	176			57
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			1			—			1
Increase (decrease) in cash, cash equivalents and restricted cash	161			(1		)	2			49			(6		)	205
Cash, cash equivalents and restricted cash, beginning of period	74			2			44			101			(1		)	220
Cash, cash equivalents and restricted cash, end of period	$	235		$	1		$	46		$	150		$	(7	)	$	425
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(51	)	$	(59	)	$	85		$	164		$	(7	)	$	132
Cash flows from investing activities:
Capital expenditures	(22		)	(46		)	(89		)	(43		)	—			(200		)
Acquisitions of businesses and assets, net of cash acquired	—			—			(10		)	(264		)	—			(274		)
Distributions of capital from equity investments	—			—			—			23			—			23
Additions to equity method investments	—			(1		)	—			(74		)	—			(75		)
Other, principally change in intercompany investing activities	—			48			—			—			(48		)	—
Net cash (used in) provided by investing activities	(22		)	1			(99		)	(358		)	(48		)	(526		)
Cash flows from financing activities:
Proceeds net of payments on long-term debt	—			97			—			(4		)	—			93
Repayment of assumed NYX debt	—			—			—			(288		)	—			(288		)
Payments of debt issuance and deferred financing costs	—			(39		)	—			—			—			(39		)
Payments on license obligations	(14		)	—			—			—			—			(14		)
Net redemptions of common stock under stock-based compensation plans and other	(19		)	—			(2		)	—			—			(21		)
Other, principally change in intercompany financing activities	(581		)	—			15			518			48			—
Net cash (used in) provided by financing activities	(614		)	58			13			226			48			(269		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			(3		)	—			(3		)
(Decrease) increase in cash, cash equivalents and restricted cash	(687		)	—			(1		)	29			(7		)	(666		)
Cash, cash equivalents and restricted cash, beginning of period	733			—			44			60			(3		)	834
Cash, cash equivalents and restricted cash end of period	$	46		$	—		$	43		$	89		$	(10	)	$	168
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes.

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Description of the Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of SGC and those subsidiaries in which we have a controlling financial interest. Investments in other entities in which we do not have a controlling financial interest but we exert significant influence are accounted for in our condensed consolidated financial statements using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of SGC and its management, we have made all adjustments necessary to present fairly our consolidated financial position, results of operations and comprehensive income (loss) and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2018 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.

New Accounting Guidance

New Accounting Guidance - Recently Adopted

The FASB issued ASU No. 2016-02, Leases (Topic 842) in 2016. ASU 2016-02 combined with all subsequent amendments (collectively, “ASC 842”) requires balance sheet recognition for all leases with a lease term greater than one year to be recorded as a lease liability (on a discounted basis) with a corresponding right-of-use asset. This guidance also expands the required quantitative and qualitative disclosures for lease arrangements and gives rise to other changes impacting certain

aspects of lessee and lessor accounting. We adopted ASC 842 as of January 1, 2019 using the optional transition method provided by ASU 2018-11, and applied both the lessee package of practical expedients and the available lessor practical expedients. During the first quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees and lessors from having to provide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases standard. We have provided the related transition disclosures as of the beginning of 2019 in accordance with ASU 2019-1. See our 2018 10-K Note 1 for the impact on our consolidated financial statements and Note 15 in this Quarterly Report for our lease accounting policy and the impact of our adoption of ASC 842.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The standard allows companies to make an election to reclassify from Accumulated Other Comprehensive Income (AOCI) to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. This ASU is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The amendments in this updated guidance should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. corporate federal income tax rate in the Tax Act is recognized. We adopted this standard effective January 1, 2019. We elected not to reclassify the income tax effects of the Tax Cuts and Jobs Act from AOCI to retained earnings. The adoption of this guidance did not have an effect on our consolidated financial statements.

New Accounting Guidance - Not Yet Adopted

The FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) in 2016. The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The new guidance will be effective for us beginning January 1, 2020. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact of adopting this guidance.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The new guidance will be effective for us beginning January 1, 2020, with early adoption permitted. We do not plan to early adopt this ASU, and we are currently evaluating the impact of adopting this guidance.

We do not expect that any other recently issued accounting guidance will have a significant effect on our consolidated financial statements.

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Revenue From Contract With Customer (Policies)	6 Months Ended
	Jun. 30, 2019
Revenue, Performance Obligation [Abstract]
Revenue from Contract with Customer [Policy Text Block]	The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on our consolidated balance sheets. Other than contracts with customers with financing arrangements exceeding 12 months, revenue recognition is generally proximal to conversion to cash, except for Lottery instant products sold under POS contracts. Revenue is recognized for such contracts upon delivery to our customers, while conversion to cash is based on the retail sale of the underlying ticket to end consumers. As a result, for such contracts revenue recognition under ASC 606 does not approximate conversion to cash.

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Summary of Revenues by Type

The following table disaggregates revenues by type within each of our business segments:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Gaming
Gaming operations	$	150	$	160	$	302	$	321
Gaming machine sales	148		168		284		313
Gaming systems	67		84		141		159
Table products	62		59		122		121
Total	$	427	$	471	$	849	$	914
Lottery
Instant products	$	150	$	150	$	290	$	300
Lottery systems	81		57		168		109
Total	$	231	$	207	$	458	$	409
SciPlay
Mobile	$	98	$	77	$	195	$	149
Web and other	20		23		41		48
Total	$	118	$	100	$	236	$	197
Digital
Sports and platform	$	26	$	20	$	56	$	46
Gaming and other	43		47		83		91
Total	$	69	$	67	$	139	$	137

Summary of Balances in Receivables and Contract Asset Accounts

The following table summarizes the activity in our contract liabilities for the reporting period:

	Six Months Ended June 30,
	2019
Contract liability balance, beginning of period(1)	$	97
Liabilities recognized during the period	33
Amounts recognized in revenue from beginning balance	(30		)
Contract liability balance, end of period(1)	$	100
(1) Contract liabilities are included within Accrued liabilities and Other long-term liabilities in our June 30, 2019 consolidated balance sheet.

The following table summarizes our receivables and contract asset balances for the periods indicated (other than contract liabilities disclosed above):

	Receivables		Contract Assets(1)
Beginning of period balance	$	753	$	114
End of period balance, June 30, 2019	778		114
(1) Contract assets are included primarily within Prepaid expenses, deposits and other current assets in our June 30, 2019 consolidated balance sheet.

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Business Segments (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Operating Information by Segment

The following tables present our segment information:

	Three Months Ended June 30, 2019
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	427		$	231		$	118		$	69		$	—		$	845
AEBITDA(2)	215			103			33			12			(28		)	$	335
Reconciling items to consolidated net loss before income taxes:
D&A	(114		)	(20		)	(2		)	(19		)	(15		)	(170		)
Restructuring and other	(2		)	(1		)	(1		)	(1		)	(1		)	(6		)
EBITDA from equity investments													(18		)	(18		)
Earnings from equity investments													7			7
Interest expense													(147		)	(147		)
Loss on debt refinancing transactions													(60		)	(60		)
Loss on remeasurement of debt													(3		)	(3		)
Other income, net													4			4
Stock-based compensation													(10		)	(10		)
Net loss before income taxes																$	(68	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.
(2) Gaming AEBITDA decreased and SciPlay AEBITDA increased compared to prior periods as the IP charges are no longer being allocated to SciPlay per the IP License Agreement discussed in Note 1. The three months ended June 30, 2019 includes $3 million in intellectual property royalties paid by the SciPlay business segment, which were terminated as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the three months ended June 30, 2018 were $6 million.

	Three Months Ended June 30, 2018
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	471		$	207		$	100		$	67		$	—		$	845
AEBITDA	236			99			23			13			(31		)	$	340
Reconciling items to consolidated net loss before income taxes:
D&A	(121		)	(14		)	(6		)	(17		)	(15		)	(173		)
Restructuring and other	(2		)	3			(1		)	(4		)	(30		)	(34		)
EBITDA from equity investments													(16		)	(16		)
Earnings from equity investments													5			5
Interest expense													(146		)	(146		)
Gain on remeasurement of debt													34			34
Other expense, net													(1		)	(1		)
Stock-based compensation													(15		)	(15		)
Net loss before income taxes																$	(6	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.

	Six Months Ended June 30, 2019
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	849		$	458		$	236		$	139		$	—		$	1,682
AEBITDA(2)	430			207			58			25			(57		)	$	663
Reconciling items to consolidated net loss before income taxes:
D&A	(226		)	(39		)	(4		)	(38		)	(28		)	(335		)
Restructuring and other	(4		)	(1		)	(2		)	(4		)	(2		)	(13		)
EBITDA from equity investments													(35		)	(35		)
Earnings from equity investments													13			13
Interest expense													(301		)	(301		)
Loss on debt refinancing transactions													(60		)	(60		)
Gain on remeasurement of debt													2			2
Other income, net													2			2
Stock-based compensation													(24		)	(24		)
Net loss before income taxes																$	(88	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.
(2) Gaming AEBITDA decreased and SciPlay AEBITDA increased compared to prior periods as the IP charges are no longer being allocated to SciPlay per the IP License Agreement discussed in Note 1. The six months ended June 30, 2019 includes $10 million in intellectual property royalties paid by the SciPlay business segment, which were terminated as of May 7, 2019 in connection with the IP License Agreement described in Note 1. The IP charges for the six months ended June 30, 2018 were $13 million.

	Six Months Ended June 30, 2018
	Gaming			Lottery			SciPlay			Digital			Unallocated and Reconciling Items(1)			Total
Total revenue	$	914		$	409		$	197		$	137		$	—		$	1,657
AEBITDA	454			193			46			30			(63		)	$	660
Reconciling items to consolidated net loss before income taxes:
D&A	(260		)	(28		)	(13		)	(33		)	(27		)	(361		)
Restructuring and other	(3		)	2			(19		)	(10		)	(56		)	(86		)
EBITDA from equity investments													(35		)	(35		)
Earnings from equity investments													12			12
Interest expense													(301		)	(301		)
Loss on debt financing transactions													(93		)	(93		)
Gain on remeasurement of debt													33			33
Other expense, net													(7		)	(7		)
Stock-based compensation													(24		)	(24		)
Net loss before income taxes																$	(202	)
(1) Includes amounts not allocated to the business segments (including corporate costs) and reconciling items to reconcile the total business segments AEBITDA to our consolidated net loss before income taxes.

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Restructuring and other (Tables)

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Schedule of Restructuring and Other Costs

The following table summarizes pre-tax restructuring and other costs for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Employee severance(1)	$	2	$	16	$	5	$	21
Acquisitions and related costs	—		—		—		8
Contingent consideration adjustment	2		—		2		18
Legal and related	—		10		—		26
Restructuring, integration and other	2		8		6		13
Total	$	6	$	34	$	13	$	86
(1) Includes employee severance and termination costs associated with restructuring and integration activities.

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Accounts and Notes Receivable and Credit Quality of Receivables (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Summary of Components of Accounts and Notes Receivable, Net

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

	June 30, 2019			December 31, 2018
Current:
Accounts receivable	$	629		$	615
Notes receivable	143			138
Allowance for doubtful accounts and notes	(36		)	(40		)
Current accounts and notes receivable, net	$	736		$	713
Long-term:
Notes receivable, net of allowance	42			40
Total accounts and notes receivable, net	$	778		$	753

Summary of Components of Notes Receivable, Net

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

	June 30, 2019			Balances over 90 days past due			December 31, 2018			Balances over 90 days past due
Notes receivable:
Domestic	$	71		$	12		$	55		$	6
International	114			23			123			25
Total notes receivable	185			35			178			31
Notes receivable allowance
Domestic	(5		)	(5		)	(6		)	(6		)
International	(18		)	(18		)	(18		)	(18		)
Total notes receivable allowance	(23		)	(23		)	(24		)	(24		)
Notes receivable, net	$	162		$	12		$	154		$	7

Schedule of Allowance for Notes Receivable Activity

The activity in our allowance for notes receivable for each of the six month periods ended June 30, 2019 and 2018 is as follows:

	Six Months Ended June 30,
	2019			2018
Beginning allowance for notes receivable	$	(24	)	$	(21	)
Provision	(3		)	(3		)
Charge-offs and recoveries	4			1
Ending allowance for notes receivable	$	(23	)	$	(23	)

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Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Summary of Inventories

Inventories consisted of the following as of the dates presented below:

	June 30, 2019		December 31, 2018
Parts and work-in-process	$	146	$	131
Finished goods	92		85
Total inventories	$	238	$	216

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Property and Equipment, net (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of Components of Property and Equipment

Property and equipment, net consisted of the following:

	June 30, 2019			December 31, 2018
Land	$	20		$	15
Buildings and leasehold improvements	152			128
Gaming and lottery machinery and equipment	1,034			1,041
Furniture and fixtures	29			27
Construction in progress	21			17
Other property and equipment	251			240
Less: accumulated depreciation	(975		)	(921		)
Total property and equipment, net	$	532		$	547

Depreciation expense is excluded from Cost of services, Cost of product sales, Cost of instant products and Other operating expenses and is separately presented within D&A.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018(1)
Depreciation expense	$	64	$	55	$	122	$	127
(1) Includes assets held for sale impairment charges of $19 million.

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Intangible Assets, net and Goodwill (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite and Indefinite-lived Intangible Assets

The following tables present certain information regarding our intangible assets as of June 30, 2019 and December 31, 2018.

	June 30, 2019							December 31, 2018
	Gross Carrying Value		Accumulated Amortization			Net Balance		Gross Carrying Value		Accumulated Amortization			Net Balance
Amortizable intangible assets:
Customer relationships	$	1,084	$	(341	)	$	743	$	1,084	$	(299	)	$	785
Intellectual property	931		(512		)	419		931		(453		)	478
Licenses	547		(291		)	256		546		(253		)	293
Brand names	123		(65		)	58		123		(59		)	64
Trade names	107		(27		)	80		108		(23		)	85
Patents and other	24		(14		)	10		23		(13		)	10
	2,816		(1,250		)	1,566		2,815		(1,100		)	1,715
Non-amortizable intangible assets:
Trade names	96		(2		)	94		96		(2		)	94
Total intangible assets	$	2,912	$	(1,252	)	$	1,660	$	2,911	$	(1,102	)	$	1,809

 

Schedule of Amortization Expense

The following reflects intangible amortization expense included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	75	$	76	$	152	$	153

The following reflects amortization of software included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	31	$	42	$	61	$	81

Reconciliation of the Carrying Amount of Goodwill, by Business Segment

The table below reconciles the change in the carrying value of goodwill by business segment for the period from

December 31, 2018 to June 30, 2019.

Goodwill	Gaming		Lottery			SciPlay		Digital		Totals
Balance as of December 31, 2018	$	2,449	$	352		$	115	$	364	$	3,280
Foreign currency adjustments	—		(1		)	—		—		(1		)
Balance as of June 30, 2019	$	2,449	$	351		$	115	$	364	$	3,279

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Software, net (Tables)

6 Months Ended

Jun. 30, 2019

Capitalized Computer Software, Net [Abstract]

Schedule of Software, net

Software, net consisted of the following:

	June 30, 2019			December 31, 2018
Software	$	1,146		$	1,101
Accumulated amortization	(881		)	(816		)
Software, net	$	265		$	285

Schedule of Amortization Expense

The following reflects intangible amortization expense included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	75	$	76	$	152	$	153

The following reflects amortization of software included within D&A:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization expense	$	31	$	42	$	61	$	81

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Long-Term and Other Debt (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Outstanding Debt

The following table reflects our outstanding debt:

	As of
	June 30, 2019										December 31, 2018
	Final Maturity	Rate(s)	Face value		Unamortized debt discount/premium and deferred financing costs, net			Book value			Book value
Senior Secured Credit Facilities:
Revolver	2020	variable	$	45	$	—		$	45		$	325
Term Loan B-5	2024	variable	4,122		(66		)	4,056			4,071
SciPlay Revolver	2024	variable	—		—			—			—
Senior Notes:
2025 Secured Notes(2)	2025	5.000%	1,250		(16		)	1,234			1,233
2026 Secured Euro Notes(3)	2026	3.375%	370		(5		)	365			367
2022 Unsecured Notes	2022	10.000%	1,200		(11		)	1,189			2,176
2026 Unsecured Euro Notes(3)	2026	5.500%	285		(4		)	281			282
2026 Unsecured Notes	2026	8.250%	1,100		(15		)	1,085			—
Subordinated Notes:
2020 Notes	2020	6.250%	244		(1		)	243			242
2021 Notes	2021	6.625%	341		(3		)	338			337
Finance lease obligations as of June 30, 2019 payable monthly through 2019 and other(4)	2019	3.900%	11		—			11			4
Total long-term debt outstanding			$	8,968	$	(121	)	$	8,847		$	9,037
Less: current portion of long-term debt								(45		)	(45		)
Long-term debt, excluding current portion								$	8,802		$	8,992
Fair value of debt(1)			$	9,066

(1) Fair value of our fixed rate and variable interest rate debt is classified within level 2 in the fair value hierarchy and has been calculated based on the quoted market prices of our securities.

(2) Includes cross-currency interest rate swap agreements that we entered into in 2018 in the amount of $460 million U.S. Dollar-denominated 2025 Secured Notes to a fixed-rate Euro-denominated debt, with a fixed annual weighted average interest rate of approximately 2.946% (see Note 16 in our 2018 10-K).

(3) We designated a portion of our 2026 Secured Euro Notes as a net investment non-derivative hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in our operating results caused by the change in foreign currency exchange rates of the Euro relative to the U.S. Dollar (see Note 12 for additional information). The total change in the face value of the 2026 Secured Euro Notes and 2026 Unsecured Euro Notes due to changes in foreign currency exchange rates since the issuance was a reduction of $58 million, of which a $3 million loss and a $2 million gain were recognized on remeasurement of debt in the Consolidated Statements of Operations for the three and six months ended June 30, 2019, respectively.

(4) Includes $10 million related to certain revenue transactions presented as debt in accordance with ASC 470.

Schedule of Components of Extinguishment and Modification of Debt

The following are components of the loss on debt financing transactions resulting from debt extinguishment and modification accounting for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Repayment and cancellation of principal balance at premium	$	50	$	—	$	50	$	110
Unamortized debt (premium) discount and deferred financing costs, net	10		—		10		(30		)
Third party debt issuance fees	—		—		—		13
Total loss on debt financing transactions	$	60	$	—	$	60	$	93

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of gains (loss) on interest rate swap contracts

The following table shows the gains (loss) and interest expense recognized on our interest rate swap contracts:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
(Loss) gain recorded in accumulated other comprehensive loss, net of tax	$	(11	)	$	4	$	(16	)	$	6
Interest expense recorded related to interest rate swap contracts	—			1		—			2

Schedule of the effect of interest rate swap contracts designated as cash flow hedges

The following table shows the effect of interest rate swap contracts designated as cash flow hedges on the consolidated statements of operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	Interest expense						Interest expense
Total interest expense which reflects the effects of cash flow hedges	$	(147	)	$	(146	)	$	(301	)	$	(301	)
Hedged item	(5		)	(5		)	(10		)	(7		)
Derivative designated as hedging instrument	5			4			10			5

Fair value of liabilities measured on recurring basis

The following table shows the fair value of our hedges:

	Balance Sheet Line Item	June 30, 2019		December 31, 2018
Interest rate swaps (1)(3)	Other liabilities	$	17	$	—
Cross-currency interest rate swaps (2)(3)	Other assets	29		18
(1) Losses of $11 million and $17 million for the three and six months ended June 30, 2019, respectively, are reflected in Derivative financial instrument unrealized (loss) gain in Other comprehensive loss.
(2) Loss of $5 million and gain of $11 million for the three and six months ended June 30, 2019, respectively, are reflected in Foreign currency translation gain (loss) in Other comprehensive loss.
(3) Inputs used to measure the fair value of our interest rate swap contracts are categorized as Level 2 in the fair value hierarchy.

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Stockholders' Deficit (Tables)

6 Months Ended

Jun. 30, 2019

Compensation Related Costs [Abstract]

Schedule of Stockholders' Deficit

The following tables present certain information regarding our stockholders’ deficit as of June 30, 2019 and June 30, 2018:

	Common Stock		Additional Paid in Capital		Accumulated Loss			Treasury Stock			Accumulated Other Comprehensive Loss			Noncontrolling Interest		Total
January 1, 2019	$	1	$	835	$	(2,824	)	$	(175	)	$	(300	)	$	—	$	(2,463	)
Net proceeds of common stock in connection with stock options and RSUs	—		2		—			—			—			—		2
Stock-based compensation	—		11		—			—			—			—		11
Net loss	—		—		(24		)	—			—			—		(24		)
Other comprehensive income	—		—		—			—			51			—		51
March 31, 2019	$	1	$	848	$	(2,848	)	$	(175	)	$	(249	)	$	—	$	(2,423	)
Net proceeds of common stock in connection with stock options and RSUs and other	—		2		—			—			—					2
Sale of SciPlay common stock and related transactions	—		328		—			—			—			91		419
Stock-based compensation	—		9		—			—			—			1		10
Net loss	—		—		(77		)	—			—			2		(75		)
Other comprehensive loss	—		—		—			—			(51		)	—		(51		)
June 30, 2019	$	1	$	1,187	$	(2,925	)	$	(175	)	$	(300	)	$	94	$	(2,118	)

	Common Stock		Additional Paid in Capital			Accumulated Loss			Treasury Stock			Accumulated Other Comprehensive Loss			Total
January 1, 2018	$	1	$	808		$	(2,461	)	$	(175	)	$	(200	)	$	(2,027	)
Net proceeds of common stock in connection with stock options and RSUs	—		(15		)	—			—			—			(15		)
Stock-based compensation	—		7			—			—			—			7
Net loss	—		—			(202		)	—			—			(202		)
Adoption impact of ASC 606	—		—			(11		)	—			—			(11		)
Other Comprehensive income	—		—			—			—			52			52
March 31, 2018	$	1	$	800		$	(2,674	)	$	(175	)	$	(148	)	$	(2,196	)
Net proceeds of common stock in connection with stock options and RSUs	—		2			—			—			—			2
Stock-based compensation	—		15			—			—			—			15
Net loss	—		—			(6		)	—			—			(6		)
Other Comprehensive loss	—		—			—			—			(83		)	(83		)
June 30, 2018	$	1	$	817		$	(2,680	)	$	(175	)	$	(231	)	$	(2,268	)

Schedule of Stock-based Compensation Expense Recognized

The following reflects total stock-based compensation expense recognized under all programs:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Related to SGC stock options	$	1	$	7	$	3	$	8
Related to SGC RSUs	5		8		17		16
Related to SciPlay RSUs	4		—		4		—
Total	$	10	$	15	$	24	$	24

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Schedule of Supplemental Operating Lease Information

Supplemental balance sheet and cash flow information related to operating leases is as follows:

	June 30, 2019
Operating lease right-of-use assets	$	113
Accrued liabilities	26
Operating lease liabilities	95
Total operating lease liabilities	$	121
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	5
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases for the six months period	$	17
Weighted average remaining lease term, years	6
Weighted average discount rate	5		%

Maturities of Lease Liabilities

ease liability maturities:

	Remainder of 2019		2020		2021		2022		2023		Thereafter		Less Imputed Interest			Total
Operating leases	$	16	$	30	$	25	$	19	$	16	$	34	$	(19	)	$	121

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Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries (Tables)

6 Months Ended

Jun. 30, 2019

Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries [Abstract]

Supplemental Condensed Consolidating Balance Sheet

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	235		$	—		$	—	$	141	$	(7	)	$	369
Restricted cash	—			1			35		8		—			44
Accounts receivable, net	—			100			195		321		—			616
Notes receivable, net	—			—			104		16		—			120
Inventories	—			47			99		103		(11		)	238
Prepaid expenses, deposits and other current assets	—			61			61		75		1			198
Property and equipment, net	34			96			231		204		(33		)	532
Operating lease right-of-use asset	1			25			33		54		—			113
Investment in subsidiaries	3,136			1,163			1,427		—		(5,726		)	—
Goodwill	—			240			1,897		1,142		—			3,279
Intangible assets, net	37			34			1,186		403		—			1,660
Intercompany balances	—			5,868			67		—		(5,935		)	—
Software, net	48			36			109		72		—			265
Other assets(2)	95			419			41		376		(433		)	498
Total assets	$	3,586		$	8,090		$	5,485	$	2,915	$	(12,144	)	$	7,932
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	$	—		$	42		$	2	$	1	$	—		$	45
Other current liabilities	52			173			242		255		(34		)	688
Long-term debt, excluding current portion	—			8,793			8		1		—			8,802
Operating lease liabilities	1			21			28		45		—			95
Other long-term liabilities	96			23			605		168		(472		)	420
Intercompany balances	5,649			—			—		286		(5,935		)	—
Total SGC stockholders’ (deficit) equity	(2,212		)	(962		)	4,600		2,065		(5,703		)	(2,212		)
Noncontrolling interest	—			—			—		94		—			94
Total liabilities and total stockholders’ (deficit) equity	$	3,586		$	8,090		$	5,485	$	2,915	$	(12,144	)	$	7,932
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Includes $11 million and $1 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
Cash and cash equivalents	$	74		$	1		$	—	$	94	$	(1	)	$	168
Restricted cash	—			1			32		6		—			39
Accounts receivable, net	—			79			205		315		—			599
Notes receivable, net	—			—			101		13		—			114
Inventories	—			40			82		111		(17		)	216
Prepaid expenses, deposits and other current assets	6			63			92		72		—			233
Property and equipment, net	31			112			219		218		(33		)	547
Investment in subsidiaries	2,836			975			1,093		—		(4,904		)	—
Goodwill	—			240			1,897		1,143		—			3,280
Intangible assets, net	43			34			1,291		441		—			1,809
Intercompany balances	—			6,054			—		—		(6,054		)	—
Software, net	58			39			128		60		—			285
Other assets(2)	110			404			46		308		(440		)	428
Total assets	$	3,158		$	8,042		$	5,186	$	2,781	$	(11,449	)	$	7,718
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	$	—		$	42		$	—	$	3	$	—		$	45
Other current liabilities	64			162			248		254		(26		)	702
Long-term debt, excluding current portion	—			8,991			—		1		—			8,992
Other long-term liabilities	106			8			637		172		(481		)	442
Intercompany balances	5,451			—			49		554		(6,054		)	—
Total SGC stockholders’ (deficit) equity	(2,463		)	(1,161		)	4,252		1,797		(4,888		)	(2,463		)
Total liabilities and total stockholders’ (deficit) equity	$	3,158		$	8,042		$	5,186	$	2,781	$	(11,449	)	$	7,718
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes.
(2) Includes $12 million and $1 million in non-current restricted cash for Guarantor Subsidiaries and Non-Guarantor Subsidiaries, respectively.

Supplemental Condensed Consolidating Statement of Income

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	147		$	358		$	407		$	(67	)	$	845
Cost of services, cost of product sales and cost of instant products(2)	—			94			108			176			(57		)	321
SG&A	31			9			48			94			(8		)	174
R&D	—			1			19			26			—			46
D&A	12			13			104			45			(4		)	170
Restructuring and other	1			1			1			3			—			6
Operating (loss) income	(44		)	29			78			63			2			128
Interest expense	—			(147		)	—			—			—			(147		)
Loss on debt financing transactions	—			(60		)	—			—			—			(60		)
Loss on remeasurement of debt	—			(3		)	—			—			—			(3		)
Other income (expense), net	16			131			(119		)	(14		)	—			14
Net (loss) income before equity in income of subsidiaries and income taxes	(28		)	(50		)	(41		)	49			2			(68		)
Equity in (loss) income of subsidiaries	(30		)	2			12			—			16			—
Income tax (expense) benefit	(19		)	14			9			(11		)	—			(7		)
Net (loss) income	(77		)	(34		)	(20		)	38			18			(75		)
Less: Net income attributable to noncontrolling interest	—			—			—			2			—			2
Net (loss) income attributable to SGC	$	(77	)	$	(34	)	$	(20	)	$	36		$	18		$	(77	)
Net (loss) income	$	(77	)	$	(34	)	$	(20	)	$	38		$	18		$	(75	)
Other comprehensive loss	(51		)	(15		)	(3		)	(66		)	84			(51		)
Total comprehensive loss	(128		)	(49		)	(23		)	(28		)	102			(126		)
Less: comprehensive income attributable to noncontrolling interest	—			—			—			2			—			2
Comprehensive loss attributable to SGC	$	(128	)	$	(49	)	$	(23	)	$	(30	)	$	102		$	(128	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes. (2) Excludes D&A.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenue	$	—		$	136		$	405		$	376		$	(72	)	$	845
Cost of services, cost of product sales and cost of instant products (2)	—			86			132			159			(61		)	316
SG&A	44			9			51			83			(13		)	174
R&D	—			1			22			26			—			49
D&A	12			7			107			50			(3		)	173
Restructuring and other	30			(3		)	2			5			—			34
Operating (loss) income	(86		)	36			91			53			5			99
Interest expense	—			(146		)	—			—			—			(146		)
Gain on remeasurement of debt	—			34			—			—			—			34
Other income (expense), net	17			132			(119		)	(23		)	—			7
Net (loss) income before equity in income of subsidiaries and income taxes	(69		)	56			(28		)	30			5			(6		)
Equity in income (loss) of subsidiaries	26			13			(17		)	—			(22		)	—
Income tax benefit (expense)	37			(26		)	(4		)	(7		)	—			—
Net (loss) income	$	(6	)	$	43		$	(49	)	$	23		$	(17	)	$	(6	)
Other comprehensive (loss) income	(83		)	30			(36		)	(119		)	125			(83		)
Comprehensive (loss) income	$	(89	)	$	73		$	(85	)	$	(96	)	$	108		$	(89	)
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes. (2) Excludes D&A.

Supplemental Condensed Consolidating Statement of Cash Flows

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2019

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(35	)	$	55		$	101		$	147		$	(6	)	$	262
Cash flows from investing activities:
Capital expenditures	(9		)	(16		)	(56		)	(51		)	—			(132		)
Distributions of capital from equity investments	—			—			—			18			—			18
Additions to equity method investments	—			(1		)	—			—			—			(1		)
Other, principally change in intercompany investing activities	—			228			(52		)	—			(176		)	—
Net cash (used in) provided by investing activities	(9		)	211			(108		)	(33		)	(176		)	(115		)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	—			(251		)	—			(2		)	—			(253		)
Payments of debt issuance and deferred financing costs	—			(14		)	—			(1		)	—			(15		)
Payments on license obligations	(13		)	—			—			—			—			(13		)
Sale of future revenue	—			—			11			—			—			11
Net proceeds from the sale of SciPlay common stock	—			—			—			342			—			342
Payments of deferred SciPlay common stock offering costs	—			—			—			(8		)	—			(8		)
Net redemptions of common stock under stock-based compensation plans and other	(1		)	(2		)	(2		)	(2		)	—			(7		)
Other, principally change in intercompany financing activities	219			—			—			(395		)	176			—
Net cash provided by (used in) financing activities	205			(267		)	9			(66		)	176			57
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			1			—			1
Increase (decrease) in cash, cash equivalents and restricted cash	161			(1		)	2			49			(6		)	205
Cash, cash equivalents and restricted cash, beginning of period	74			2			44			101			(1		)	220
Cash, cash equivalents and restricted cash, end of period	$	235		$	1		$	46		$	150		$	(7	)	$	425
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes and the Secured Notes.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2018

	SGC (Parent)			SGI (Issuer1)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(51	)	$	(59	)	$	85		$	164		$	(7	)	$	132
Cash flows from investing activities:
Capital expenditures	(22		)	(46		)	(89		)	(43		)	—			(200		)
Acquisitions of businesses and assets, net of cash acquired	—			—			(10		)	(264		)	—			(274		)
Distributions of capital from equity investments	—			—			—			23			—			23
Additions to equity method investments	—			(1		)	—			(74		)	—			(75		)
Other, principally change in intercompany investing activities	—			48			—			—			(48		)	—
Net cash (used in) provided by investing activities	(22		)	1			(99		)	(358		)	(48		)	(526		)
Cash flows from financing activities:
Proceeds net of payments on long-term debt	—			97			—			(4		)	—			93
Repayment of assumed NYX debt	—			—			—			(288		)	—			(288		)
Payments of debt issuance and deferred financing costs	—			(39		)	—			—			—			(39		)
Payments on license obligations	(14		)	—			—			—			—			(14		)
Net redemptions of common stock under stock-based compensation plans and other	(19		)	—			(2		)	—			—			(21		)
Other, principally change in intercompany financing activities	(581		)	—			15			518			48			—
Net cash (used in) provided by financing activities	(614		)	58			13			226			48			(269		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			—			(3		)	—			(3		)
(Decrease) increase in cash, cash equivalents and restricted cash	(687		)	—			(1		)	29			(7		)	(666		)
Cash, cash equivalents and restricted cash, beginning of period	733			—			44			60			(3		)	834
Cash, cash equivalents and restricted cash end of period	$	46		$	—		$	43		$	89		$	(10	)	$	168
(1) Issuer of obligations under the Subordinated Notes, the Unsecured Notes (other than the 2026 Unsecured Notes, which were not issued until March 2019) and the Secured Notes.

XML

Description of the Business and Summary of Significant Accounting Policies Initial Public Offering - (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended		12 Months Ended
	May 07, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Subsidiary, Sale of Stock [Line Items]
Document Period End Date				Jun. 30, 2019
Net proceeds from the sale of SciPlay common stock				$ 342
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest		$ (2,118)		(2,118)		$ (2,463)
Proceeds from Lines of Credit				40	$ 185
IPO [Member] | Revolving Credit Facility | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Debt Instrument, Fronting Fee		0.125%
Line of Credit Facility, Commitment Fee Percentage		0.50%
Debt Instrument, Leverage Ratio		0.375%
IPO [Member] | Letter of Credit [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Letters of Credit Outstanding, Amount		$ 15		15
IPO [Member] | London Interbank Offered Rate (LIBOR) [Member] | Revolving Credit Facility | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Debt Instrument, Basis Spread on Variable Rate		2.25%
IPO [Member] | London Interbank Offered Rate (LIBOR), Leveraged Base Step Down [Member] | Revolving Credit Facility | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Debt Instrument, Basis Spread on Variable Rate		0.25%
IPO [Member] | London Interbank Offered Rate (LIBOR), Leveraged Base Step Up [Member] | Revolving Credit Facility | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Debt Instrument, Basis Spread on Variable Rate		0.25%
IPO [Member] | Base Rate [Member] | Revolving Credit Facility | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Debt Instrument, Basis Spread on Variable Rate		1.25%
IPO [Member] | Base Rate, Step Down [Member] | Revolving Credit Facility | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Debt Instrument, Basis Spread on Variable Rate		0.25%
IPO [Member] | Secured Debt [Member] | Revolving Credit Facility | SciPlay Revolver, Maturing 2024 [Member] [Member]
Subsidiary, Sale of Stock [Line Items]
Principal debt amount		$ 150		150
Additional Paid in Capital | IPO [Member]
Subsidiary, Sale of Stock [Line Items]
Net proceeds from the sale of SciPlay common stock	$ 312	328
Noncontrolling Interest | IPO [Member]
Subsidiary, Sale of Stock [Line Items]
Net proceeds from the sale of SciPlay common stock	$ 30	91
Subsidiaries [Member]
Subsidiary, Sale of Stock [Line Items]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest		94		94
Subsidiaries [Member] | IPO [Member]
Subsidiary, Sale of Stock [Line Items]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	18.00%
Noncontrolling Interest, Ownership Percentage by Parent	97.90%
Income Tax Benefit, Percentage Realized	85.00%
Subsidiaries [Member] | IPO [Member] | Common Class B [Member]
Subsidiary, Sale of Stock [Line Items]
Noncontrolling Interest, Ownership Percentage By Parent, Threshold	10.00%
Noncontrolling Interest, Ownership Percentage by Parent	82.00%
Subsidiaries [Member] | IPO [Member] | Intellectual property
Subsidiary, Sale of Stock [Line Items]
Proceeds from Sale of Productive Assets	$ 255	$ 3	$ 6	$ 10	$ 13	$ 26	$ 24

XML

Description of the Business and Summary of Significant Accounting Policies (Details) shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 shares	Jun. 30, 2018 shares	Jun. 30, 2019 Segment shares	Jun. 30, 2018 shares
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of business segments | Segment			4
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	2	3	2	3
Restricted Stock Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	3	3	3	3

XML

Revenue Recognition - Summary of Revenue by Type (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Rental income revenue outside scope of new revenue standard	$ 95	$ 69	$ 191	$ 136
Total revenue	845	845	1,682	1,657
Instant products
Disaggregation of Revenue [Line Items]
Total revenue	150	150	290	300
Gaming
Disaggregation of Revenue [Line Items]
Total revenue	427	471		914
Gaming | Gaming operations
Disaggregation of Revenue [Line Items]
Total revenue	150	160	302	321
Gaming | Gaming machine sales
Disaggregation of Revenue [Line Items]
Total revenue	148	168	284	313
Gaming | Gaming systems
Disaggregation of Revenue [Line Items]
Total revenue	67	84	141	159
Gaming | Table products
Disaggregation of Revenue [Line Items]
Total revenue	62	59	122	121
Lottery
Disaggregation of Revenue [Line Items]
Total revenue	231	207		409
Lottery | Instant products
Disaggregation of Revenue [Line Items]
Total revenue	150	150	290	300
Lottery | Lottery systems
Disaggregation of Revenue [Line Items]
Total revenue	81	57	168	109
SciPlay
Disaggregation of Revenue [Line Items]
Total revenue	118	100	236	197
SciPlay | Mobile
Disaggregation of Revenue [Line Items]
Total revenue	98	77	195	149
SciPlay | Web and other
Disaggregation of Revenue [Line Items]
Total revenue	20	23	41	48
Digital
Disaggregation of Revenue [Line Items]
Total revenue	69	67		137
Digital | Sports and platform
Disaggregation of Revenue [Line Items]
Total revenue	26	20	56	46
Digital | Gaming and other
Disaggregation of Revenue [Line Items]
Total revenue	$ 43	$ 47	$ 83	$ 91

XML

Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue from External Customer [Line Items]
Rental income revenue outside scope of new revenue standard	$ 95	$ 69	$ 191	$ 136
Amounts recognized in revenue			30
Lottery | Instant products | Accounting Standards Update 2014-09 [Member]
Revenue from External Customer [Line Items]
Amounts recognized in revenue	$ 26	$ 24	$ 49	$ 58

XML

Revenue Recognition - Summary of Contract Liabilities (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Change In Contract Liabilities [Roll Forward]
Contract liability balance, beginning of period			$ 97
Liabilities recognized during the period			33
Amounts recognized in revenue from beginning balance			(30)
Contract liability balance, end of period	$ 100		100
Accounting Standards Update 2014-09 [Member] | Lottery | Instant products
Change In Contract Liabilities [Roll Forward]
Amounts recognized in revenue from beginning balance	$ (26)	$ (24)	$ (49)	$ (58)

XML

Revenue Recognition - Balances in Receivables and Contract Asset Accounts (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Revenue from Contract with Customer [Abstract]
Receivables	$ 778	$ 753
Contract Assets	$ 114	$ 114

XML

Business Segments - Additional Information (Details)	6 Months Ended
	Jun. 30, 2019 Segment
Segment Reporting [Abstract]
Number of business segments	4

XML

Business Segments - Schedule of Segment Reporting Information, by Segment (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended		12 Months Ended
	May 07, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Document Period End Date				Jun. 30, 2019
Total revenue		$ 845	$ 845	$ 1,682	$ 1,657
AEBITDA(2)		335	340	663	660
Reconciling items to consolidated net loss before income taxes:
D&A		(170)	(173)	(335)	(361)
Restructuring and other		(6)	(34)	(13)	(86)
EBITDA from equity investments		(18)	(16)	(35)	(35)
Earnings from equity investments		7	5	13	12
Interest expense		(147)	(146)	(301)	(301)
Gain (Loss) on Extinguishment of Debt		(60)	0	(60)	(93)
Loss on remeasurement of debt		(3)	34	2	33
Other income, net		4	(1)	2	(7)
Stock-based compensation		(10)	(15)	(24)	(24)
Net (loss) income before equity in income of subsidiaries and income taxes		(68)	(6)	(88)	(202)
Unallocated and Reconciling Items
Segment Reporting Information [Line Items]
Total revenue		0	0	0	0
AEBITDA(2)		(28)	(31)	(57)	(63)
Reconciling items to consolidated net loss before income taxes:
D&A		(15)	(15)	(28)	(27)
Restructuring and other		(1)	(30)	(2)	(56)
Gaming
Segment Reporting Information [Line Items]
Total revenue		427	471		914
Gaming | Operating Segments
Segment Reporting Information [Line Items]
Total revenue		427	471	849	914
AEBITDA(2)		215	236	430	454
Reconciling items to consolidated net loss before income taxes:
D&A		(114)	(121)	(226)	(260)
Restructuring and other		(2)	(2)	(4)	(3)
Lottery
Segment Reporting Information [Line Items]
Total revenue		231	207		409
Lottery | Operating Segments
Segment Reporting Information [Line Items]
Total revenue		231	207	458	409
AEBITDA(2)		103	99	207	193
Reconciling items to consolidated net loss before income taxes:
D&A		(20)	(14)	(39)	(28)
Restructuring and other		(1)	3	(1)	2
SciPlay
Segment Reporting Information [Line Items]
Total revenue		118	100	236	197
SciPlay | Operating Segments
Segment Reporting Information [Line Items]
Total revenue		118	100	236	197
AEBITDA(2)		33	23	58	46
Reconciling items to consolidated net loss before income taxes:
D&A		(2)	(6)	(4)	(13)
Restructuring and other		(1)	(1)	(2)	(19)
Digital
Segment Reporting Information [Line Items]
Total revenue		69	67		137
Digital | Operating Segments
Segment Reporting Information [Line Items]
Total revenue		69	67	139	137
AEBITDA(2)		12	13	25	30
Reconciling items to consolidated net loss before income taxes:
D&A		(19)	(17)	(38)	(33)
Restructuring and other		(1)	(4)	(4)	(10)
Subsidiaries [Member] | Intellectual property | IPO [Member]
Segment Reporting Information [Line Items]
Proceeds from Sale of Productive Assets	$ 255	$ 3	$ 6	$ 10	$ 13	$ 26	$ 24

XML

Restructuring and other (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Restructuring Cost and Reserve [Line Items]
Restructuring and other	$ 6	$ 34	$ 13	$ 86
Employee severance
Restructuring Cost and Reserve [Line Items]
Restructuring and other	2	16	5	21
Acquisitions and related costs
Restructuring Cost and Reserve [Line Items]
Restructuring and other	0	0	0	8
Contingent consideration adjustment
Restructuring Cost and Reserve [Line Items]
Restructuring and other	2	0	2	18
Legal and related
Restructuring Cost and Reserve [Line Items]
Restructuring and other	0	10	0	26
Restructuring, integration and other
Restructuring Cost and Reserve [Line Items]
Restructuring and other	$ 2	$ 8	$ 6	$ 13

XML

Accounts and Notes Receivable and Credit Quality of Receivables - Components of Accounts and Notes Receivable, Net (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Current:
Accounts receivable	$ 629	$ 615
Notes receivable	143	138
Allowance for doubtful accounts and notes	(36)	(40)
Current accounts and notes receivable, net	736	713
Long-term:
Notes receivable, net of allowance	42	40
Total accounts and notes receivable, net	$ 778	$ 753

XML

Accounts and Notes Receivable and Credit Quality of Receivables - Additional Information (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts and notes receivable, net	$ 778	$ 753
Contractual term of notes receivable	24 months
Notes receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts and notes receivable, net	$ 162	$ 154
Percentage of total notes receivable over 90 days past due	7.00%	4.00%
Mexico
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts and notes receivable, net	$ 25
Proceeds from collection of accounts and notes receivable, net	16
Peru
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts and notes receivable, net	13
Proceeds from collection of accounts and notes receivable, net	4
Argentina
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts and notes receivable, net	22
Proceeds from collection of accounts and notes receivable, net	$ 9
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivable with imputed interest, effective yield	3.00%
Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Receivable with imputed interest, effective yield	10.00%

XML

Accounts and Notes Receivable and Credit Quality of Receivables - Components of Notes Receivable, Net (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total accounts and notes receivable, net	$ 778	$ 753
Notes receivable
Financing Receivable, Recorded Investment, Past Due [Line Items]
Notes receivable	185	178
Notes receivable allowance	(23)	(24)	$ (23)	$ (21)
Total accounts and notes receivable, net	162	154
Domestic | Notes receivable
Financing Receivable, Recorded Investment, Past Due [Line Items]
Notes receivable	71	55
Notes receivable allowance	(5)	(6)
International | Notes receivable
Financing Receivable, Recorded Investment, Past Due [Line Items]
Notes receivable	114	123
Notes receivable allowance	(18)	(18)
Balances over 90 days past due | Notes receivable
Financing Receivable, Recorded Investment, Past Due [Line Items]
Notes receivable over 90 days past due	35	31
Notes receivable allowance for balances over 90 days past due	(23)	(24)
Notes receivable, net, balances over 90 days past due	12	7
Balances over 90 days past due | Domestic | Notes receivable
Financing Receivable, Recorded Investment, Past Due [Line Items]
Notes receivable over 90 days past due	12	6
Notes receivable allowance for balances over 90 days past due	(5)	(6)
Balances over 90 days past due | International | Notes receivable
Financing Receivable, Recorded Investment, Past Due [Line Items]
Notes receivable over 90 days past due	23	25
Notes receivable allowance for balances over 90 days past due	$ (18)	$ (18)

XML

Accounts and Notes Receivable and Credit Quality of Receivables - Allowance for Notes Receivable Activity (Details) - Notes receivable - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Allowance for notes receivable
Beginning allowance for notes receivable	$ (24)	$ (21)
Provision	(3)	(3)
Charge-offs and recoveries	4	1
Ending allowance for notes receivable	$ (23)	$ (23)

XML

Inventories (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Parts and work-in-process	$ 146	$ 131
Finished goods	92	85
Total inventories	$ 238	$ 216

XML

Property and Equipment, net (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation	$ (975.0)		$ (975.0)		$ (921.0)
Total property and equipment, net	532.0		532.0		547.0
Depreciation expense	64.0	$ 55.0	122.0	$ 127.0
Impaired Long-Lived Assets Held and Used, Income Statement Classification	27.0		27.0
Impairment of Long-Lived Assets Held-for-use	9.0
Depreciation, amortization and impairments	170.0	$ 173.0	335.0	$ 361.0
Land
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	20.0		20.0		15.0
Buildings and leasehold improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	152.0		152.0		128.0
Gaming and lottery machinery and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,034.0		1,034.0		1,041.0
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	29.0		29.0		27.0
Construction in progress
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	21.0		21.0		17.0
Other property and equipment
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	251.0		251.0		240.0
Equipment [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment, net	$ 1.0		1.0		$ 2.0
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Property, Plant and Equipment [Line Items]
Depreciation, amortization and impairments			$ 19.0

XML

Intangible Assets, net and Goodwill - Schedule of Finite and Indefinite-lived Intangible Assets (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Amortizable intangible assets:
Amortizable intangible assets, gross carrying value	$ 2,816	$ 2,815
Amortizable intangible assets, accumulated amortization	(1,250)	(1,100)
Amortizable intangible assets, net balance	1,566	1,715
Non-amortizable intangible assets:
Total intangible assets, gross carrying value	2,912	2,911
Total intangible assets, accumulated amortization (excluding goodwill)	(1,252)	(1,102)
Total intangible assets, net	1,660	1,809
Trade names
Non-amortizable intangible assets:
Non-amortizable intangible assets, Gross Carrying Value	96	96
Non-amortizable intangible assets, Accumulated Amortization	(2)	(2)
Non-amortizable intangible assets, Net Balance	94	94
Customer relationships
Amortizable intangible assets:
Amortizable intangible assets, gross carrying value	1,084	1,084
Amortizable intangible assets, accumulated amortization	(341)	(299)
Amortizable intangible assets, net balance	743	785
Intellectual property
Amortizable intangible assets:
Amortizable intangible assets, gross carrying value	931	931
Amortizable intangible assets, accumulated amortization	(512)	(453)
Amortizable intangible assets, net balance	419	478
Licenses
Amortizable intangible assets:
Amortizable intangible assets, gross carrying value	547	546
Amortizable intangible assets, accumulated amortization	(291)	(253)
Amortizable intangible assets, net balance	256	293
Brand names
Amortizable intangible assets:
Amortizable intangible assets, gross carrying value	123	123
Amortizable intangible assets, accumulated amortization	(65)	(59)
Amortizable intangible assets, net balance	58	64
Trade names
Amortizable intangible assets:
Amortizable intangible assets, gross carrying value	107	108
Amortizable intangible assets, accumulated amortization	(27)	(23)
Amortizable intangible assets, net balance	80	85
Patents and other
Amortizable intangible assets:
Amortizable intangible assets, gross carrying value	24	23
Amortizable intangible assets, accumulated amortization	(14)	(13)
Amortizable intangible assets, net balance	$ 10	$ 10

XML

Intangible Assets, net and Goodwill - Intangible Amortization Expense (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 75	$ 76	$ 152	$ 153

XML

Intangible Assets, net and Goodwill - Reconciliation of the Carrying Amount of Goodwill (Details) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($) unit
Goodwill [Line Items]
Number of reporting units | unit	10
Goodwill [Roll Forward]
Balance at the beginning of the period	$ 3,280
Foreign currency adjustments	(1)
Balance at the end of the period	3,279
Gaming
Goodwill [Roll Forward]
Balance at the beginning of the period	2,449
Foreign currency adjustments	0
Balance at the end of the period	2,449
Lottery
Goodwill [Roll Forward]
Balance at the beginning of the period	352
Foreign currency adjustments	(1)
Balance at the end of the period	351
SciPlay
Goodwill [Roll Forward]
Balance at the beginning of the period	115
Foreign currency adjustments	0
Balance at the end of the period	$ 115
Digital
Goodwill [Line Items]
Number of reporting units | unit	2
Goodwill [Roll Forward]
Balance at the beginning of the period	$ 364
Foreign currency adjustments	0
Balance at the end of the period	364
Digital Sports and Platform | Digital
Goodwill [Line Items]
Goodwill transfered	230
Digital Gaming and Other | Digital
Goodwill [Line Items]
Goodwill transfered	$ 134

XML

Software, net (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Capitalized Computer Software, Net [Abstract]
Software	$ 1,146		$ 1,146		$ 1,101
Accumulated amortization	(881)		(881)		(816)
Software, net	265		265		$ 285
Amortization expense	$ 31	$ 42	$ 61	$ 81

XML

Equity Investments (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Equity Method Investments and Joint Ventures [Abstract]
Equity investments	$ 273		$ 298
Distributed earnings from equity investments	$ 40	$ 42

XML

Long-Term and Other Debt - Additional Information (Details) - USD ($)		3 Months Ended		6 Months Ended
	Mar. 19, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Debt Instrument
Document Period End Date				Jun. 30, 2019
Gain (Loss) on Extinguishment of Debt		$ (60,000,000)	$ 0	$ (60,000,000)	$ (93,000,000)
2026 Unsecured Notes | Senior Notes
Debt Instrument
Principal debt amount	$ 1,100,000,000
Debt issuance price, percent of principal	100.00%
Outstanding debt redeemed	$ 1,000,000,000
Redemption price, percent of principal	100.00%
Financing costs	$ 16,000,000
IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Revolving Credit Facility [Member]
Debt Instrument
Line of Credit Facility, Commitment Fee Percentage		0.50%
Debt Instrument, Leverage Ratio		0.375%
Debt Instrument, Fronting Fee		0.125%
IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Letter of Credit [Member]
Debt Instrument
Letters of Credit Outstanding, Amount		$ 15,000,000		15,000,000
IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Secured Debt [Member] | Revolving Credit Facility [Member]
Debt Instrument
Principal debt amount		$ 150,000,000		$ 150,000,000
London Interbank Offered Rate (LIBOR) [Member] | IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Revolving Credit Facility [Member]
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		2.25%
London Interbank Offered Rate (LIBOR), Leveraged Base Step Down [Member] | IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Revolving Credit Facility [Member]
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		0.25%
London Interbank Offered Rate (LIBOR), Leveraged Base Step Up [Member] | IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Revolving Credit Facility [Member]
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		0.25%
Base Rate [Member] | IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Revolving Credit Facility [Member]
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		1.25%
Base Rate, Step Down [Member] | IPO [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member] | Revolving Credit Facility [Member]
Debt Instrument
Debt Instrument, Basis Spread on Variable Rate		0.25%

XML

Long-Term and Other Debt - Schedule of Outstanding Debt (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Mar. 19, 2019	Dec. 31, 2018	Feb. 28, 2018
Debt Instrument
Document Period End Date		Jun. 30, 2019
Face value	$ 8,968,000,000	$ 8,968,000,000
Unamortized debt discount/premium and deferred financing costs, net	(121,000,000)	(121,000,000)
Total long-term debt outstanding	8,847,000,000	8,847,000,000		$ 9,037,000,000
Less: current portion of long-term debt	(45,000,000)	(45,000,000)		(45,000,000)
Long-term debt, excluding current portion	8,802,000,000	8,802,000,000		8,992,000,000
Fair value of debt	9,066,000,000	9,066,000,000
2025 Secured Notes
Debt Instrument
Debt interest rate					2.946%
Senior Secured and Unsecured Notes, Maturing 2026
Debt Instrument
Reduction of debt due to change in foreign currency exchange rate		58,000,000
Gain (loss) on remeasurement of debt	$ 3,000,000	$ 2,000,000
Senior Notes | 2025 Secured Notes
Debt Instrument
Debt interest rate	5.00%	5.00%			2.946%
Face value	$ 1,250,000,000	$ 1,250,000,000
Unamortized debt discount/premium and deferred financing costs, net	(16,000,000)	(16,000,000)
Total long-term debt outstanding	$ 1,234,000,000	$ 1,234,000,000		1,233,000,000
Principal debt amount					$ 460,000,000
Senior Notes | 2026 Secured Euro Notes
Debt Instrument
Debt interest rate	3.375%	3.375%
Face value	$ 370,000,000	$ 370,000,000
Unamortized debt discount/premium and deferred financing costs, net	(5,000,000)	(5,000,000)
Total long-term debt outstanding	$ 365,000,000	$ 365,000,000		367,000,000
Senior Notes | 2022 Unsecured Notes
Debt Instrument
Debt interest rate	10.00%	10.00%
Face value	$ 1,200,000,000	$ 1,200,000,000
Unamortized debt discount/premium and deferred financing costs, net	(11,000,000)	(11,000,000)
Total long-term debt outstanding	$ 1,189,000,000	$ 1,189,000,000		2,176,000,000
Senior Notes | 2026 Unsecured Euro Notes
Debt Instrument
Debt interest rate	5.50%	5.50%
Face value	$ 285,000,000	$ 285,000,000
Unamortized debt discount/premium and deferred financing costs, net	(4,000,000)	(4,000,000)
Total long-term debt outstanding	$ 281,000,000	$ 281,000,000		282,000,000
Senior Notes | 2026 Unsecured Notes
Debt Instrument
Debt interest rate	8.25%	8.25%
Face value	$ 1,100,000,000	$ 1,100,000,000
Unamortized debt discount/premium and deferred financing costs, net	(15,000,000)	(15,000,000)
Total long-term debt outstanding	$ 1,085,000,000	$ 1,085,000,000		0
Principal debt amount			$ 1,100,000,000
Outstanding debt redeemed			$ 1,000,000,000
Subordinated Notes | 2020 Notes
Debt Instrument
Debt interest rate	6.25%	6.25%
Face value	$ 244,000,000	$ 244,000,000
Unamortized debt discount/premium and deferred financing costs, net	(1,000,000)	(1,000,000)
Total long-term debt outstanding	$ 243,000,000	$ 243,000,000		242,000,000
Subordinated Notes | 2021 Notes
Debt Instrument
Debt interest rate	6.625%	6.625%
Face value	$ 341,000,000	$ 341,000,000
Unamortized debt discount/premium and deferred financing costs, net	(3,000,000)	(3,000,000)
Total long-term debt outstanding	338,000,000	338,000,000		337,000,000
Subordinated Notes | Capital lease obligations as of March 31, 2019 payable monthly through 2019 and other
Debt Instrument
Face value	11,000,000	11,000,000
Unamortized debt discount/premium and deferred financing costs, net	0	0
Total long-term debt outstanding	$ 11,000,000	$ 11,000,000
Capital Lease Obligations | Capital lease obligations as of March 31, 2019 payable monthly through 2019 and other
Debt Instrument
Debt interest rate	3.90%	3.90%
Total long-term debt outstanding				4,000,000
Revenue transactions presented as debt	$ 10,000,000	$ 10,000,000
Revolving Credit Facility [Member] | Secured Debt [Member] | Revolving Credit Facility [Member]
Debt Instrument
Face value	45,000,000	45,000,000
Unamortized debt discount/premium and deferred financing costs, net	0	0
Total long-term debt outstanding	45,000,000	45,000,000		325,000,000
Revolving Credit Facility [Member] | Secured Debt [Member] | Term Loan B-5
Debt Instrument
Face value	4,122,000,000	4,122,000,000
Unamortized debt discount/premium and deferred financing costs, net	(66,000,000)	(66,000,000)
Total long-term debt outstanding	4,056,000,000	4,056,000,000
Revolving Credit Facility [Member] | Secured Debt [Member] | SciPlay Revolver, Maturing 2024 [Member] [Member]
Debt Instrument
Face value	0	0
Unamortized debt discount/premium and deferred financing costs, net	0	0
Total long-term debt outstanding	$ 0	$ 0		0
Term Loan Facility | Secured Debt [Member] | Term Loan B-5
Debt Instrument
Total long-term debt outstanding				$ 4,071,000,000

XML

Long-Term and Other Debt - Loss on Debt Financing Transactions (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Debt Disclosure [Abstract]
Repayment and cancellation of principal balance at premium	$ 50	$ 0	$ 50	$ 110
Unamortized debt (premium) discount and deferred financing costs, net	10	0	10	(30)
Third party debt issuance fees	0	0	0	13
Total loss on debt financing transactions	$ 60	$ 0	$ 60	$ 93

XML

Fair Value Measurements - Additional Information (Details) - USD ($)	3 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Feb. 28, 2018
Derivative [Line Items]
Amount expected to be reclassified during next 12 months	$ 0
Contingent consideration	22,000,000	$ 45,000,000
Accrued Liabilities
Derivative [Line Items]
Contingent consideration	$ 10,000,000	$ 22,000,000
Cash Flow Hedging | Designated as Hedging Instrument | Interest rate swap
Derivative [Line Items]
Derivative average fixed interest rate	2.4418%
Total notional amount of swaps	$ 800,000,000
Senior Secured Notes, Maturing 2025
Derivative [Line Items]
Debt interest rate			2.946%
Senior Secured Notes, Maturing 2025 | Senior Notes
Derivative [Line Items]
Debt interest rate	5.00%		2.946%
Senior Secured Notes, Maturing 2025 | Senior Notes | Cross-currency interest rate swaps
Derivative [Line Items]
Long-term debt			$ 460,000,000
Senior Secured Euro Notes, Maturing 2026 | Net Investment Hedging | Designated as Hedging Instrument
Derivative [Line Items]
Designated as net investment non-derivative hedge	$ 270,000,000
Senior Secured Euro Notes, Maturing 2026 | Senior Notes
Derivative [Line Items]
Debt interest rate	3.375%

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Fair Value Measurements - Gains (Loss) and Interest Expense on Interest Rate Swap Contracts (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
(Loss) gain recorded in accumulated other comprehensive loss, net of tax	$ (5)	$ (4)	$ (10)	$ (5)
Interest rate swap
Derivative Instruments, Gain (Loss) [Line Items]
(Loss) gain recorded in accumulated other comprehensive loss, net of tax	(11)	4	(16)	6
Interest expense recorded related to interest rate swap contracts	$ 0	$ 1	$ 0	$ 2

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Fair Value Measurements - Effect of Interest Rate Swap Contracts (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Total interest expense which reflects the effects of cash flow hedges	$ (147)	$ (146)	$ (301)	$ (301)
Hedged item	(5)	(5)	(10)	(7)
Derivative designated as hedging instrument	$ 5	$ 4	$ 10	$ 5

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Fair Value Measurements - Fair Value of Hedges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Derivatives, Fair Value [Line Items]
Gain (loss) recorded in other comprehensive income	$ (5)	$ (4)	$ (10)	$ (5)
Interest rate swap
Derivatives, Fair Value [Line Items]
Gain (loss) recorded in other comprehensive income	(11)	$ 4	(16)	$ 6
Interest rate swap | Other liabilities
Derivatives, Fair Value [Line Items]
Derivative fair value	17		17
Gain (loss) recorded in other comprehensive income	11		17
Interest rate swap | Other assets
Derivatives, Fair Value [Line Items]
Derivative fair value					$ 0
Cross-currency interest rate swaps | Other assets
Derivatives, Fair Value [Line Items]
Derivative fair value	29		29		$ 18
Gain (loss) recorded in other comprehensive income	$ 5		$ (11)

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Stockholders' Deficit (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended				6 Months Ended
	May 07, 2019	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total SGC stockholders' deficit		$ (2,423)	$ (2,463)	$ (2,196)	$ (2,027)	$ (2,463)	$ (2,027)
Net proceeds of common stock in connection with stock options and RSUs		2	2	(2)	15
Net proceeds from the sale of SciPlay common stock						342
Gain (Loss) on Disposition of Stock in Subsidiary		419
Stock-based compensation		10	11	15	7
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest		(75)		(6)		(99)	(208)
Net loss		(77)	(24)	(6)	(202)	(101)	(208)
Net Income (Loss) Attributable to Noncontrolling Interest		2		0		2	0
Other comprehensive loss		(51)	51	(83)	52		(31)
Common Stock, Value, Outstanding		1				1		$ 1
Additional Paid in Capital, Common Stock		1,187				1,187		835
Retained Earnings (Accumulated Deficit)		(2,925)				(2,925)		(2,824)
Treasury Stock, Value		175				175		175
Accumulated Other Comprehensive Income (Loss), Net of Tax		(300)				(300)		(300)
Stockholders' Equity Attributable to Noncontrolling Interest		94				94		0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest		(2,118)				(2,118)		(2,463)
Total SGC stockholders' deficit		(2,212)	(2,423)	(2,268)	(2,196)	(2,212)	(2,268)
Share-based compensation expense		10		15		24	24
Related to SGC stock options
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation expense		1		7		3	8
Related to SGC RSUs
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation expense		5		8		17	16
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total SGC stockholders' deficit		1	1	1	1	1	1
Total SGC stockholders' deficit			1	1	1		1
Additional Paid in Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total SGC stockholders' deficit		848	835	800	808	835	808
Net proceeds of common stock in connection with stock options and RSUs		2	2	2	(15)
Stock-based compensation		9	11	15	7
Total SGC stockholders' deficit			848	817	800		817
Accumulated Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total SGC stockholders' deficit		(2,848)	(2,824)	(2,674)	(2,461)	(2,824)	(2,461)
Net loss			(24)	(6)	(202)
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets									$ (11)
Total SGC stockholders' deficit			(2,848)	(2,680)	(2,674)		(2,680)
Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total SGC stockholders' deficit		(175)	(175)	(175)	(175)	(175)	(175)
Total SGC stockholders' deficit			(175)	(175)	(175)		(175)
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total SGC stockholders' deficit		(249)	(300)	(148)	(200)	(300)	(200)
Other comprehensive loss		(51)	51	(83)	52
Total SGC stockholders' deficit			(249)	(231)	$ (148)		(231)
Noncontrolling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation		1
Stockholders' Equity Attributable to Noncontrolling Interest			$ 0					$ 0
Accounting Standards Update 2014-09 [Member] | Accumulated Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets									$ (11)
SciPlay | Related to SGC RSUs
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation expense		4		$ 0		$ 4	$ 0
IPO [Member] | Additional Paid in Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net proceeds from the sale of SciPlay common stock	$ 312	328
IPO [Member] | Noncontrolling Interest
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net proceeds from the sale of SciPlay common stock	$ 30	$ 91
SciPlay Corporation Long-Term Incentive Plan [Member] [Domain] | Common Class A [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		6.5				6.5
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number		3.4				3.4
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Exercise Price		$ 16.00				$ 16.00

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Income Taxes (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Effective tax rates	(10.00%)	0.00%	(13.00%)	3.00%

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Leases - Additional Information (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
	Jan. 01, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Range [Axis] [Line Items]
Operating Lease, Weighted Average Remaining Lease Term		6 years		6 years
Lease extension option	5 years
Option to terminate period	1 year
Document Period End Date				Jun. 30, 2019
Operating lease expenses		$ 10	$ 8	$ 19	$ 15
Minimum [Member]
Range [Axis] [Line Items]
Operating Lease, Weighted Average Remaining Lease Term	1 year
Maximum [Member]
Range [Axis] [Line Items]
Operating Lease, Weighted Average Remaining Lease Term	11 years

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Leases - Supplemental Operating Lease Information (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Document Period End Date	Jun. 30, 2019
Operating lease right-of-use assets	$ 113	$ 0
Accrued liabilities	26
Operating lease liabilities	95	$ 0
Operating lease liabilities	121
Operating Lease, Right-of-Use Asset, in Exchange for Lease Obligations	5
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases for the six months period	$ 17
Operating Lease, Weighted Average Remaining Lease Term	6 years
Weighted average discount rate	5.00%

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Leases - Maturities of Lease Liabilities (Details) $ in Millions	Jun. 30, 2019 USD ($)
Leases [Abstract]
2019	$ 16
2020	30
2021	25
2022	19
2023	16
Thereafter	34
Less Imputed Interest	(19)
Total	$ 121

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Litigation (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Loss contingency accrual	$ 3	$ 4
Contractual penalty	$ 14

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Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries - Supplemental Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Millions	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Assets
Cash and cash equivalents	$ 369		$ 168
Restricted cash	44		39
Accounts receivable, net	616		599
Notes receivable, net	120		114
Inventories	238		216
Prepaid expenses, deposits and other current assets	198		233
Property and equipment, net	532		547
Operating lease right-of-use assets	113		0
Investment in subsidiaries	0		0
Goodwill	3,279		3,280
Intangible assets, net	1,660		1,809
Intercompany balances	0		0
Software, net	265		285
Other assets	498		428
Total assets	7,932		7,718
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	45		45
Other current liabilities	688		702
Long-term debt, excluding current portion	8,802		8,992
Operating lease liabilities	95		0
Other long-term liabilities	420		442
Intercompany balances	0		0
Total liabilities and total stockholders’ (deficit) equity	(2,212)	$ (2,423)	(2,463)	$ (2,268)	$ (2,196)	$ (2,027)
Stockholders' Equity Attributable to Noncontrolling Interest	94		0
Total liabilities and total stockholders’ (deficit) equity	7,932		7,718
Non-current restricted cash	12		13
Reportable Legal Entities | SGI (Issuer)
Assets
Cash and cash equivalents	0		1
Restricted cash	1		1
Accounts receivable, net	100		79
Notes receivable, net	0		0
Inventories	47		40
Prepaid expenses, deposits and other current assets	61		63
Property and equipment, net	96		112
Operating lease right-of-use assets	25
Investment in subsidiaries	1,163		975
Goodwill	240		240
Intangible assets, net	34		34
Intercompany balances	5,868		6,054
Software, net	36		39
Other assets	419		404
Total assets	8,090		8,042
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	42		42
Other current liabilities	173		162
Long-term debt, excluding current portion	8,793		8,991
Operating lease liabilities	21
Other long-term liabilities	23		8
Intercompany balances	0		0
Total liabilities and total stockholders’ (deficit) equity	(962)		(1,161)
Stockholders' Equity Attributable to Noncontrolling Interest	0
Total liabilities and total stockholders’ (deficit) equity	8,090		8,042
Reportable Legal Entities | SGC (Parent)
Assets
Cash and cash equivalents	235		74
Restricted cash	0		0
Accounts receivable, net	0		0
Notes receivable, net	0		0
Inventories	0		0
Prepaid expenses, deposits and other current assets	0		6
Property and equipment, net	34		31
Operating lease right-of-use assets	1
Investment in subsidiaries	3,136		2,836
Goodwill	0		0
Intangible assets, net	37		43
Intercompany balances	0		0
Software, net	48		58
Other assets	95		110
Total assets	3,586		3,158
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	0		0
Other current liabilities	52		64
Long-term debt, excluding current portion	0		0
Operating lease liabilities	1
Other long-term liabilities	96		106
Intercompany balances	5,649		5,451
Total liabilities and total stockholders’ (deficit) equity	(2,212)		(2,463)
Stockholders' Equity Attributable to Noncontrolling Interest	0
Total liabilities and total stockholders’ (deficit) equity	3,586		3,158
Reportable Legal Entities | Guarantor Subsidiaries
Assets
Cash and cash equivalents	0		0
Restricted cash	35		32
Accounts receivable, net	195		205
Notes receivable, net	104		101
Inventories	99		82
Prepaid expenses, deposits and other current assets	61		92
Property and equipment, net	231		219
Operating lease right-of-use assets	33
Investment in subsidiaries	1,427		1,093
Goodwill	1,897		1,897
Intangible assets, net	1,186		1,291
Intercompany balances	67		0
Software, net	109		128
Other assets	41		46
Total assets	5,485		5,186
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	2		0
Other current liabilities	242		248
Long-term debt, excluding current portion	8		0
Operating lease liabilities	28
Other long-term liabilities	605		637
Intercompany balances	0		49
Total liabilities and total stockholders’ (deficit) equity	4,600		4,252
Stockholders' Equity Attributable to Noncontrolling Interest	0
Total liabilities and total stockholders’ (deficit) equity	5,485		5,186
Non-current restricted cash	11		12
Reportable Legal Entities | Non-Guarantor Subsidiaries
Assets
Cash and cash equivalents	141		94
Restricted cash	8		6
Accounts receivable, net	321		315
Notes receivable, net	16		13
Inventories	103		111
Prepaid expenses, deposits and other current assets	75		72
Property and equipment, net	204		218
Operating lease right-of-use assets	54
Investment in subsidiaries	0		0
Goodwill	1,142		1,143
Intangible assets, net	403		441
Intercompany balances	0		0
Software, net	72		60
Other assets	376		308
Total assets	2,915		2,781
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	1		3
Other current liabilities	255		254
Long-term debt, excluding current portion	1		1
Operating lease liabilities	45
Other long-term liabilities	168		172
Intercompany balances	286		554
Total liabilities and total stockholders’ (deficit) equity	2,065		1,797
Stockholders' Equity Attributable to Noncontrolling Interest	94
Total liabilities and total stockholders’ (deficit) equity	2,915		2,781
Non-current restricted cash	1		1
Eliminating Entries
Assets
Cash and cash equivalents	(7)		(1)
Restricted cash	0		0
Accounts receivable, net	0		0
Notes receivable, net	0		0
Inventories	(11)		(17)
Prepaid expenses, deposits and other current assets	1		0
Property and equipment, net	(33)		(33)
Operating lease right-of-use assets	0
Investment in subsidiaries	(5,726)		(4,904)
Goodwill	0		0
Intangible assets, net	0		0
Intercompany balances	(5,935)		(6,054)
Software, net	0		0
Other assets	(433)		(440)
Total assets	(12,144)		(11,449)
Liabilities and stockholders’ (deficit) equity
Current portion of long-term debt	0		0
Other current liabilities	(34)		(26)
Long-term debt, excluding current portion	0		0
Operating lease liabilities	0
Other long-term liabilities	(472)		(481)
Intercompany balances	(5,935)		(6,054)
Total liabilities and total stockholders’ (deficit) equity	(5,703)		(4,888)
Stockholders' Equity Attributable to Noncontrolling Interest	0
Total liabilities and total stockholders’ (deficit) equity	$ (12,144)		$ (11,449)

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Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries - Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Condensed Financial Statements
Revenue	$ 845		$ 845		$ 1,682	$ 1,657
Cost of services, cost of product sales and cost of instant products(2)	321		316		628	613
Selling, general and administrative	174		174		360	346
Research and development	46		49		95	103
Depreciation, amortization and impairments	170		173		335	361
Restructuring and other	6		34		13	86
Operating (loss) income	128		99		251	148
Interest expense	(147)		(146)		(301)	(301)
Gain (Loss) on Extinguishment of Debt	(60)		0		(60)	(93)
(Loss) gain on remeasurement of debt	(3)		34		2	33
Other income (expense), net	14		7		20	11
Net (loss) income before equity in income of subsidiaries and income taxes	(68)		(6)		(88)	(202)
Equity in (loss) income of subsidiaries	0		0		0	0
Income tax (expense) benefit	(7)		0		(11)	(6)
Net (loss) income	(75)		(6)		(99)	(208)
Less: Net income attributable to noncontrolling interest	2		0		2	0
Net Income (Loss) Attributable to Parent	(77)	$ (24)	(6)	$ (202)	(101)	(208)
Other comprehensive loss	(51)	$ 51	(83)	$ 52		(31)
Foreign currency translation gain, net of tax	(39)		(88)		16	(37)
Pension and post-retirement gain (loss), net of tax	(1)		1		0	0
Derivative financial instruments unrealized (loss) gain, net of tax	(11)		4		(16)	6
Other Comprehensive Income (Loss), Net of Tax	(51)				0
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	(126)		(89)		(99)	(239)
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	2		0		2	0
Comprehensive loss attributable to SGC	(128)		(89)		(101)	(239)
Reportable Legal Entities | SGI (Issuer)
Condensed Financial Statements
Revenue	147		136		305	266
Cost of services, cost of product sales and cost of instant products(2)	94		86		195	172
Selling, general and administrative	9		9		20	20
Research and development	1		1		2	1
Depreciation, amortization and impairments	13		7		25	15
Restructuring and other	1		(3)		1	(2)
Operating (loss) income	29		36		62	60
Interest expense	(147)		(146)		(301)	(301)
Gain (Loss) on Extinguishment of Debt	(60)				(60)	(93)
(Loss) gain on remeasurement of debt	(3)		34		2	33
Other income (expense), net	131		132		263	269
Net (loss) income before equity in income of subsidiaries and income taxes	(50)		56		(34)	(32)
Equity in (loss) income of subsidiaries	2		13		9	17
Income tax (expense) benefit	14		(26)		9	8
Net (loss) income	(34)				(16)
Less: Net income attributable to noncontrolling interest	0				0
Net Income (Loss) Attributable to Parent	(34)		43		(16)	(7)
Other comprehensive loss			30			12
Other Comprehensive Income (Loss), Net of Tax	(15)				(6)
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	(49)				(22)
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	0				0
Comprehensive loss attributable to SGC	(49)		73		(22)	5
Reportable Legal Entities | SGC (Parent)
Condensed Financial Statements
Revenue	0		0		0	0
Cost of services, cost of product sales and cost of instant products(2)	0		0		0	0
Selling, general and administrative	31		44		66	82
Research and development	0		0		0	0
Depreciation, amortization and impairments	12		12		24	21
Restructuring and other	1		30		2	56
Operating (loss) income	(44)		(86)		(92)	(159)
Interest expense	0		0		0	0
Gain (Loss) on Extinguishment of Debt	0				0	0
(Loss) gain on remeasurement of debt	0		0		0	0
Other income (expense), net	16		17		36	33
Net (loss) income before equity in income of subsidiaries and income taxes	(28)		(69)		(56)	(126)
Equity in (loss) income of subsidiaries	(30)		26		(24)	(58)
Income tax (expense) benefit	(19)		37		(21)	(24)
Net (loss) income	(77)				(101)
Less: Net income attributable to noncontrolling interest	0				0
Net Income (Loss) Attributable to Parent	(77)		(6)		(101)	(208)
Other comprehensive loss			(83)			(31)
Other Comprehensive Income (Loss), Net of Tax	(51)				0
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	(128)				(101)
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	0				0
Comprehensive loss attributable to SGC	(128)		(89)		(101)	(239)
Reportable Legal Entities | Guarantor Subsidiaries
Condensed Financial Statements
Revenue	358		405		716	792
Cost of services, cost of product sales and cost of instant products(2)	108		132		210	250
Selling, general and administrative	48		51		107	109
Research and development	19		22		42	45
Depreciation, amortization and impairments	104		107		203	233
Restructuring and other	1		2		3	3
Operating (loss) income	78		91		151	152
Interest expense	0		0		0	0
Gain (Loss) on Extinguishment of Debt	0				0	0
(Loss) gain on remeasurement of debt	0		0		0	0
Other income (expense), net	(119)		(119)		(243)	(252)
Net (loss) income before equity in income of subsidiaries and income taxes	(41)		(28)		(92)	(100)
Equity in (loss) income of subsidiaries	12		(17)		23	(7)
Income tax (expense) benefit	9		(4)		22	21
Net (loss) income	(20)				(47)
Less: Net income attributable to noncontrolling interest	0				0
Net Income (Loss) Attributable to Parent	(20)		(49)		(47)	(86)
Other comprehensive loss			(36)			(13)
Other Comprehensive Income (Loss), Net of Tax	(3)				(1)
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	(23)				(48)
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	0				0
Comprehensive loss attributable to SGC	(23)		(85)		(48)	(99)
Reportable Legal Entities | Non-Guarantor Subsidiaries
Condensed Financial Statements
Revenue	407		376		792	745
Cost of services, cost of product sales and cost of instant products(2)	176		159		328	313
Selling, general and administrative	94		83		188	162
Research and development	26		26		51	57
Depreciation, amortization and impairments	45		50		92	98
Restructuring and other	3		5		7	29
Operating (loss) income	63		53		126	86
Interest expense	0		0		0	0
Gain (Loss) on Extinguishment of Debt	0				0	0
(Loss) gain on remeasurement of debt	0		0		0	0
Other income (expense), net	(14)		(23)		(36)	(39)
Net (loss) income before equity in income of subsidiaries and income taxes	49		30		90	47
Equity in (loss) income of subsidiaries	0		0		0	0
Income tax (expense) benefit	(11)		(7)		(21)	(11)
Net (loss) income	38				69
Less: Net income attributable to noncontrolling interest	2				2
Net Income (Loss) Attributable to Parent	36		23		67	36
Other comprehensive loss			(119)			(46)
Other Comprehensive Income (Loss), Net of Tax	(66)				5
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	(28)				74
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	2				2
Comprehensive loss attributable to SGC	(30)		(96)		72	(10)
Eliminating Entries
Condensed Financial Statements
Revenue	(67)		(72)		(131)	(146)
Cost of services, cost of product sales and cost of instant products(2)	(57)		(61)		(105)	(122)
Selling, general and administrative	(8)		(13)		(21)	(27)
Research and development	0		0		0	0
Depreciation, amortization and impairments	(4)		(3)		(9)	(6)
Restructuring and other	0		0		0	0
Operating (loss) income	2		5		4	9
Interest expense	0		0		0	0
Gain (Loss) on Extinguishment of Debt	0				0	0
(Loss) gain on remeasurement of debt	0		0		0	0
Other income (expense), net	0		0		0	0
Net (loss) income before equity in income of subsidiaries and income taxes	2		5		4	9
Equity in (loss) income of subsidiaries	16		(22)		(8)	48
Income tax (expense) benefit	0		0		0	0
Net (loss) income	18				(4)
Less: Net income attributable to noncontrolling interest	0				0
Net Income (Loss) Attributable to Parent	18		(17)		(4)	57
Other comprehensive loss			125			47
Other Comprehensive Income (Loss), Net of Tax	84				2
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	102				(2)
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	0				0
Comprehensive loss attributable to SGC	$ 102		$ 108		$ (2)	$ 104

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Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries - Supplemental Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Condensed Financial Statements
Net cash (used in) provided by operating activities	$ 262	$ 132
Cash flows from investing activities:
Capital expenditures	(132)	(200)
Acquisitions of businesses and assets, net of cash acquired	0	(274)
Distributions of capital from equity investments	18	23
Additions to equity method investments	1	75
Payments for (Proceeds from) Other Investing Activities		75
Other, principally change in intercompany investing activities	0	0
Net cash (used in) provided by investing activities	(115)	(526)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	(253)	93
Repayment of assumed NYX debt	0	(288)
Payments of debt issuance and deferred financing costs	(15)	(39)
Payments on license obligations	(13)	(14)
Sale of future revenue	11
Net proceeds from the sale of SciPlay common stock	342
Payments of deferred SciPlay common stock offering costs	(8)	0
Net redemptions of common stock under stock-based compensation plans and other	(7)	(21)
Other, principally change in intercompany financing activities	0	0
Net cash provided by (used in) financing activities	57	(269)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1	(3)
Increase (decrease) in cash, cash equivalents and restricted cash	205	(666)
Cash, cash equivalents and restricted cash, beginning of period	220	834
Cash, cash equivalents and restricted cash, end of period	425	168
Reportable Legal Entities | SGI (Issuer)
Condensed Financial Statements
Net cash (used in) provided by operating activities	55	(59)
Cash flows from investing activities:
Capital expenditures	(16)	(46)
Acquisitions of businesses and assets, net of cash acquired		0
Distributions of capital from equity investments	0	0
Additions to equity method investments	1
Payments for (Proceeds from) Other Investing Activities		1
Other, principally change in intercompany investing activities	228	48
Net cash (used in) provided by investing activities	211	1
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	(251)	97
Repayment of assumed NYX debt		0
Payments of debt issuance and deferred financing costs	(14)	(39)
Payments on license obligations	0	0
Sale of future revenue	0
Net proceeds from the sale of SciPlay common stock	0
Payments of deferred SciPlay common stock offering costs	0
Net redemptions of common stock under stock-based compensation plans and other	(2)	0
Other, principally change in intercompany financing activities	0	0
Net cash provided by (used in) financing activities	(267)	58
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0	0
Increase (decrease) in cash, cash equivalents and restricted cash	(1)	0
Cash, cash equivalents and restricted cash, beginning of period	2	0
Cash, cash equivalents and restricted cash, end of period	1	0
Reportable Legal Entities | SGC (Parent)
Condensed Financial Statements
Net cash (used in) provided by operating activities	(35)	(51)
Cash flows from investing activities:
Capital expenditures	(9)	(22)
Acquisitions of businesses and assets, net of cash acquired		0
Distributions of capital from equity investments	0	0
Additions to equity method investments	0
Payments for (Proceeds from) Other Investing Activities		0
Other, principally change in intercompany investing activities	0	0
Net cash (used in) provided by investing activities	(9)	(22)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	0	0
Repayment of assumed NYX debt		0
Payments of debt issuance and deferred financing costs	0	0
Payments on license obligations	(13)	(14)
Sale of future revenue	0
Net proceeds from the sale of SciPlay common stock	0
Payments of deferred SciPlay common stock offering costs	0
Net redemptions of common stock under stock-based compensation plans and other	(1)	(19)
Other, principally change in intercompany financing activities	219	(581)
Net cash provided by (used in) financing activities	205	(614)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0	0
Increase (decrease) in cash, cash equivalents and restricted cash	161	(687)
Cash, cash equivalents and restricted cash, beginning of period	74	733
Cash, cash equivalents and restricted cash, end of period	235	46
Reportable Legal Entities | Guarantor Subsidiaries
Condensed Financial Statements
Net cash (used in) provided by operating activities	101	85
Cash flows from investing activities:
Capital expenditures	(56)	(89)
Acquisitions of businesses and assets, net of cash acquired		(10)
Distributions of capital from equity investments	0	0
Additions to equity method investments	0
Payments for (Proceeds from) Other Investing Activities		0
Other, principally change in intercompany investing activities	(52)	0
Net cash (used in) provided by investing activities	(108)	(99)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	0	0
Repayment of assumed NYX debt		0
Payments of debt issuance and deferred financing costs	0	0
Payments on license obligations	0	0
Sale of future revenue	11
Net proceeds from the sale of SciPlay common stock	0
Payments of deferred SciPlay common stock offering costs	0
Net redemptions of common stock under stock-based compensation plans and other	(2)	(2)
Other, principally change in intercompany financing activities	0	15
Net cash provided by (used in) financing activities	9	13
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0	0
Increase (decrease) in cash, cash equivalents and restricted cash	2	(1)
Cash, cash equivalents and restricted cash, beginning of period	44	44
Cash, cash equivalents and restricted cash, end of period	46	43
Reportable Legal Entities | Non-Guarantor Subsidiaries
Condensed Financial Statements
Net cash (used in) provided by operating activities	147	164
Cash flows from investing activities:
Capital expenditures	(51)	(43)
Acquisitions of businesses and assets, net of cash acquired		(264)
Distributions of capital from equity investments	18	23
Additions to equity method investments	0
Payments for (Proceeds from) Other Investing Activities		74
Other, principally change in intercompany investing activities	0	0
Net cash (used in) provided by investing activities	(33)	(358)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	(2)	(4)
Repayment of assumed NYX debt		(288)
Payments of debt issuance and deferred financing costs	(1)	0
Payments on license obligations	0	0
Sale of future revenue	0
Net proceeds from the sale of SciPlay common stock	342
Payments of deferred SciPlay common stock offering costs	(8)
Net redemptions of common stock under stock-based compensation plans and other	(2)	0
Other, principally change in intercompany financing activities	(395)	518
Net cash provided by (used in) financing activities	(66)	226
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1	(3)
Increase (decrease) in cash, cash equivalents and restricted cash	49	29
Cash, cash equivalents and restricted cash, beginning of period	101	60
Cash, cash equivalents and restricted cash, end of period	150	89
Eliminating Entries
Condensed Financial Statements
Net cash (used in) provided by operating activities	(6)	(7)
Cash flows from investing activities:
Capital expenditures	0	0
Acquisitions of businesses and assets, net of cash acquired		0
Distributions of capital from equity investments	0	0
Additions to equity method investments	0
Payments for (Proceeds from) Other Investing Activities		0
Other, principally change in intercompany investing activities	(176)	(48)
Net cash (used in) provided by investing activities	(176)	(48)
Cash flows from financing activities:
Payments of long-term debt, net of proceeds	0	0
Repayment of assumed NYX debt		0
Payments of debt issuance and deferred financing costs	0	0
Payments on license obligations	0	0
Sale of future revenue	0
Net proceeds from the sale of SciPlay common stock	0
Payments of deferred SciPlay common stock offering costs	0
Net redemptions of common stock under stock-based compensation plans and other	0	0
Other, principally change in intercompany financing activities	176	48
Net cash provided by (used in) financing activities	176	48
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0	0
Increase (decrease) in cash, cash equivalents and restricted cash	(6)	(7)
Cash, cash equivalents and restricted cash, beginning of period	(1)	(3)
Cash, cash equivalents and restricted cash, end of period	$ (7)	$ (10)