Operating Segment Information

6 Months Ended

Jun. 30, 2011

Operating Segment Information

Operating Segment Information

(2) Operating Segment Information

We operate in three segments: Printed Products Group; Lottery Systems Group; and Diversified Gaming Group. During the first quarter of 2011 we reviewed the allocation of overhead expenses to our reportable segments in light of the realignment of our management structure. Based on this review, we determined to no longer allocate certain overhead expenses to our reportable segments. This change, which was effective January 1, 2011, had no impact on the Company’s consolidated balance sheets or its statements of operations, cash flows or changes in stockholders’ equity for any periods. Prior period segment information has been adjusted to reflect the change in segment reporting.

The following tables represent revenue, cost of revenue, depreciation, amortization, selling, general and administrative expenses and operating income for the three and six months ended June 30, 2011 and 2010, by reportable segments. Corporate expenses, including interest expense, other (income) expense and corporate depreciation and amortization, are not allocated to the reportable segments.

	Three Months Ended June 30, 2011
	Printed Products Group		Lottery Systems Group		Diversified Gaming Group		Totals
Revenue:
Instant tickets	$	130,419	$	—	$	—	$	130,419
Services	—		51,196		30,900		82,096
Sales	2,087		5,634		12		7,733
Total revenue	$	132,506	$	56,830	$	30,912	$	220,248
Cost of instant tickets (1)	$	72,133	$	—	$	—	$	72,133
Cost of services (1)	—		26,220		15,240		41,460
Cost of sales (1)	1,238		4,123		—		5,361
Selling, general and administrative expenses	13,112		5,524		3,636		22,272
Depreciation and amortization	8,208		11,879		8,789		28,876
Segment operating income	$	37,815	$	9,084	$	3,247	$	50,146
Unallocated corporate costs							21,282
Consolidated operating income							$	28,864

	Three Months Ended June 30, 2010
	Printed Products Group		Lottery Systems Group		Diversified Gaming Group			Totals
Revenue:
Instant tickets	$	118,439	$	—	$	—		$	118,439
Services	—		53,517		47,493			101,010
Sales	2,731		8,666		2,187			13,584
Total revenue	$	121,170	$	62,183	$	49,680		$	233,033
Cost of instant tickets (1)	$	68,227	$	—	$	—		$	68,227
Cost of services (1)	—		25,637		29,534			55,171
Cost of sales (1)	1,969		6,186		1,445			9,600
Selling, general and administrative expenses	11,730		6,858		5,181			23,769
Write-down of assets held for sale	—		—		5,874			5,874
Depreciation and amortization	8,429		10,839		7,686			26,954
Segment operating income	$	30,815	$	12,663	$	(40	)	$	43,438
Unallocated corporate costs								16,907
Consolidated operating income								$	26,531

(1) Exclusive of depreciation and amortization.

	Six Months Ended June 30, 2011
	Printed Products Group		Lottery Systems Group		Diversified Gaming Group		Totals
Revenue:
Instant tickets	$	244,279	$	—	$	—	$	244,279
Services	—		100,412		55,431		155,843
Sales	3,857		12,807		118		16,782
Total revenue	$	248,136	$	113,219	$	55,549	$	416,904
Cost of instant tickets (1)	$	139,366	$	—	$	—	$	139,366
Cost of services (1)	—		52,188		28,194		80,382
Cost of sales (1)	2,244		8,772		35		11,051
Selling, general and administrative expenses	23,492		9,796		6,562		39,850
Depreciation and amortization	16,568		23,246		19,837		59,651
Segment operating income	$	66,466	$	19,217	$	921	$	86,604
Unallocated corporate costs							43,387
Consolidated operating income							$	43,217

	Six Months Ended June 30, 2010
	Printed Products Group		Lottery Systems Group		Diversified Gaming Group		Totals
Revenue:
Instant tickets	$	227,538	$	—	$	—	$	227,538
Services	—		101,704		93,010		194,714
Sales	5,601		18,377		3,142		27,120
Total revenues	$	233,139	$	120,081	$	96,152	$	449,372
Cost of instant tickets (1)	$	132,144	$	—	$	—	$	132,144
Cost of services (1)	—		52,310		57,303		109,613
Cost of sales (1)	3,977		13,645		2,244		19,866
Selling, general and administrative expenses	21,970		12,239		11,554		45,763
Write-down of assets held for sale	—		—		5,874		5,874
Depreciation and amortization	16,966		21,653		15,867		54,486
Segment operating income	$	58,082	$	20,234	$	3,310	$	81,626
Unallocated corporate costs							33,592
Consolidated operating income							$	48,034

(1) Exclusive of depreciation and amortization.

The following table provides a reconciliation of segment operating income to consolidated income before income taxes for each period:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Reported segment operating income	$	50,146		$	43,438		$	86,604		$	81,626
Unallocated corporate costs	(21,282		)	(16,907		)	(43,387		)	(33,592		)
Consolidated operating income	28,864			26,531			43,217			48,034
Interest expense	(26,409		)	(24,845		)	(52,864		)	(49,559		)
Earnings from equity investments	9,224			13,631			18,574			29,443
Other income (expense), net	876			(6,584		)	1,870			(12,566		)
Income before income taxes	$	12,555		$	8,733		$	10,797		$	15,352

In evaluating financial performance, we focus on operating income as a segment’s measure of profit or loss. Operating income is income before interest income, interest expense, earnings from equity investments, unallocated corporate expenses and income taxes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (see Note 1 of the Notes to Consolidated Financial Statements in our 2010 Annual Report on Form 10-K).