UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 2, 2017
SCIENTIFIC GAMES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 81-0422894 | |
(State of incorporation) | (IRS Employer | |
Identification No.) |
0-13063
(Commission File Number)
6650 S. El Camino Road Las Vegas, Nevada 89118
(Address of registrant’s principal executive office)
(702) 897-7150
(Registrant’s telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CPR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
The information contained under Item 2.02 in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and, as a result, such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On March 2, 2017, Scientific Games Corporation (the “Company”) issued a press release announcing, among other things, results for the three and twelve months ended December 31, 2016. A copy of the press release that will be discussed on the Company’s earnings call is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The Company’s press release, in addition to containing results that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), contains certain “non-GAAP financial measures” as that term is defined by the rules of the Securities and Exchange Commission (the “SEC”). The Company’s press release includes the most directly comparable financial measures calculated and presented in accordance with GAAP, information reconciling the non-GAAP financial measures to the nearest GAAP financial measures, a statement disclosing the reasons why the Company’s management believes that presentation of the non-GAAP financial measures provides useful information to investors regarding the Company’s financial condition and results of operations, and a statement disclosing the additional purposes for which the Company’s management uses the non-GAAP financial measures.
The non-GAAP financial measures used in the press release should not be considered in isolation of, as a substitute for, or superior to, the financial information prepared in accordance with GAAP. The non-GAAP financial measures as defined in the press release may differ from similarly titled measures presented by other companies. The non-GAAP financial measures, as well as other information in the press release, should be read in conjunction with the Company’s financial statements filed with the SEC.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release of Scientific Games Corporation, dated March 2, 2017. |
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 | ||
By: | /s/ Michael A. Quartieri | |
Name: Michael A. Quartieri Title: Executive Vice President, Chief Financial Officer, Treasurer and Corporate Secretary |
Date: March 2, 2017
Exhibit Index
Exhibit No. | Description | |
99.1 | Press Release of Scientific Games Corporation, dated March 2, 2017. |
Scientific Games Reports Fourth Quarter and Full Year 2016 Results
LAS VEGAS, March 2, 2017 /PRNewswire/ -- Scientific Games Corporation (NASDAQ: SGMS) ("Scientific Games" or the "Company") today reported results for the fourth quarter and full year ended December 31, 2016. In addition, the Company recently completed financing transactions that resulted in an approximate $30 million reduction in annualized cash interest costs at current rates, an extension of a substantial portion of its debt maturities into 2021 and 2022, and a reduction in exposure to variable interest rates.
Fourth Quarter 2016 Financial Highlights:
Full Year 2016 Financial Highlights:
Scientific Games CEO Kevin Sheehan said, "2016 was another year of growth, progress and industry-leading product innovation for Scientific Games. The 2016 fourth quarter was the fifth consecutive quarter of growth with year-over-year revenue growth besting last year's strong performance. Our Gaming division continues to lead with innovation and strong execution, including the launch of the Gamescape™ platform, which in the fourth quarter helped drive the first quarterly sequential increase in our wide-area progressive ("WAP") premium participation installed base in more than three years, as well as the initial very promising performance of our innovative TwinStar™ J43 for-sale gaming cabinet. Our Lottery division extended its steady momentum with several big contract wins and successful systems launches in the U.S. and around the world. Our SG Interactive® performance remains stellar, with the exciting play of our social game apps driving social B2C gaming revenue up 52 percent versus the year-ago quarter. A third-party report estimates that the rapid growth of SG Interactive in its B2C business has led to five consecutive quarters of outperforming the social casino market, including fourth quarter 2016 year-over-year growth that was five times the social gaming industry growth.
"With 2017 off and running, we are maintaining focus on playing smart to galvanize our business growth. We are driving innovation to create new, differentiated products for our customers, improve financial performance to accelerate deleveraging, and build a culture open to new ideas and committed to exceeding the expectations of our customers and stakeholders," Sheehan said.
Scientific Games CFO Michael Quartieri added, "We continue to refine our business processes to yield greater financial discipline, while ensuring continued investment in innovation to drive profitable growth. While improvement initiatives implemented in the fourth quarter had a cash cost of $6 million, we expect these actions will expand our margins and cash flow in 2017. Importantly, in early 2017 we took steps that reduced our annual cash interest burden by approximately $30 million at current rates, while extending the average maturity of our capital structure. We expect these steps will yield a planned increase in cash flow that supports our goal of additional deleveraging in 2017."
SUMMARY CONSOLIDATED RESULTS | Three Months |
| Twelve Months | ||||||||
($ in millions, except per share amounts) | Ended Dec. 31, |
| Ended Dec. 31, | ||||||||
| 2016 |
| 2015 |
| 2016 |
| 2015 | ||||
Revenue | $ | 752.2 |
| $ | 737.0 |
| $ | 2,883.4 |
| $ | 2,758.8 |
Operating (loss) income | (12.3) |
| (54.4) |
| 130.6 |
| (1,024.6) | ||||
Net loss | (110.8) |
| (127.5) |
| (353.7) |
| (1,394.3) | ||||
Net cash provided by operating activities | 76.2 |
| 158.7 |
| 419.0 |
| 414.2 | ||||
Capital expenditures | (58.5) |
| (90.0) |
| (272.9) |
| (323.6) | ||||
Net payment of debt | (17.2) |
| (32.5) |
| (139.7) |
| (141.3) | ||||
Increase (decrease) in cash and cash equivalents | (5.8) |
| 26.6 |
| (13.6) |
| (43.1) | ||||
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Non-GAAP Financial Measures:(1) |
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AEBITDA | $ | 293.5 |
| $ | 292.9 |
| $ | 1,103.6 |
| $ | 1,075.2 |
AEBITDA margin | 39.0% |
| 39.7% |
| 38.3% |
| 39.0% | ||||
Free cash flow | $ | 2.1 |
| $ | 59.2 |
| $ | 120.0 |
| $ | 86.1 |
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| Dec. 31 |
| Dec. 31 | |||
Balance Sheet Measures, as of: |
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| 2016 |
| 2015 | ||||
Cash and cash equivalents |
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| $ | 115.1 |
| $ | 128.7 | ||
Total debt |
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| $ | 8,074.2 |
| $ | 8,207.0 | ||
Available liquidity |
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| $ | 631.6 |
| $ | 583.0 | ||
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(1) The financial measures "AEBITDA", "AEBITDA margin", "free cash flow", and "EBITDA from equity investments" (disclosed in a table below) are non-GAAP financial measures defined below under "Non-GAAP Financial Measures" and reconciled to the most directly comparable GAAP measures in the accompanying supplemental tables at the end of this release. |
GAMING SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 | |||||||||||||||
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GAMING SEGMENT | Three Months Ended |
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($ in millions) | December 31, |
| Increase (Decrease) | ||||||||||||
| 2016 |
| 2015 |
| Amount |
| % | ||||||||
Revenue |
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Gaming operations | $ | 172.6 |
| $ | 186.1 |
| $ | (13.5) |
| (7.3)% | |||||
Gaming machine sales | 169.5 |
| 174.1 |
| (4.6) |
| (2.6)% | ||||||||
Gaming systems | 63.9 |
| 68.6 |
| (4.7) |
| (6.9)% | ||||||||
Table products | 54.9 |
| 40.2 |
| 14.7 |
| 36.6% | ||||||||
| $ | 460.9 |
| $ | 469.0 |
| $ | (8.1) |
| (1.7)% | |||||
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Operating income | $ | 70.4 |
| $ | 53.6 |
| $ | 16.8 |
| 31.3% | |||||
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AEBITDA(1) | $ | 219.1 |
| $ | 221.3 |
| $ | (2.2) |
| (1.0)% | |||||
AEBITDA margin | 47.5% |
| 47.2% |
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(1) AEBITDA in the 2016 and 2015 fourth quarter periods included $2.1 million and $1.6 million, respectively, of EBITDA from equity investments in
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LOTTERY SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 | |||||||||||
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LOTTERY SEGMENT | Three Months Ended |
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($ in millions) | December 31, |
| Increase (Decrease) | ||||||||
| 2016 |
| 2015 |
| Amount |
| % | ||||
Revenue |
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Instant games | $ | 140.5 |
| $ | 142.0 |
| $ | (1.5) |
| (1.1)% | |
Services | 41.9 |
| 49.0 |
| (7.1) |
| (14.5)% | ||||
Product sales | 17.3 |
| 16.7 |
| 0.6 |
| 3.6% | ||||
| $ | 199.7 |
| $ | 207.7 |
| $ | (8.0) |
| (3.9)% | |
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Operating loss | $ | (26.2) |
| $ | (63.4) |
| $ | 37.2 |
| 58.7% | |
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AEBITDA(1) | $ | 79.1 |
| $ | 90.6 |
| $ | (11.5) |
| (12.7)% | |
AEBITDA margin | 39.6% |
| 43.6% |
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(1) AEBITDA in the 2016 and 2015 fourth quarter periods included $11.8 million and $16.9 million, respectively, of EBITDA from equity investments in Lotterie Nazionali S.r.l. ("LNS"), Northstar New Jersey Lottery Group, LLC, Beijing Guard Libang Technology Co., Ltd., Beijing CITIC Scientific Games Technology Co. Ltd. ("CSG"), Hellenic Lotteries S.A. ("Hellenic Lotteries") and Northstar Lottery Group, LLC ("Northstar Illinois"). |
INTERACTIVE SEGMENT HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 | |||||||||||||||
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INTERACTIVE SEGMENT | Three Months Ended |
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(in millions, except ARPDAU) | December 31, |
| Increase (Decrease) | ||||||||||||
| 2016 |
| 2015 |
| Amount |
| % | ||||||||
Revenue |
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Social gaming - B2C | $ | 74.8 |
| $ | 49.2 |
| $ | 25.6 |
| 52.0% | |||||
Other interactive | 16.8 |
| 11.1 |
| 5.7 |
| 51.4% | ||||||||
| $ | 91.6 |
| $ | 60.3 |
| $ | 31.3 |
| 51.9% | |||||
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Operating income | $ | 13.7 |
| $ | 9.6 |
| $ | 4.1 |
| 42.7% | |||||
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AEBITDA | $ | 19.7 |
| $ | 13.5 |
| $ | 6.2 |
| 45.9% | |||||
AEBITDA margin | 21.5% |
| 22.4% |
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Interactive Key Performance Indicators | |||||||||||||||
Interactive - social casinos: |
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Average monthly average user(1) | 7.7 |
| 8.1 |
| (0.4) |
| (4.9)% | ||||||||
Average daily average user(2) | 2.4 |
| 2.3 |
| 0.1 |
| 4.3% | ||||||||
Average daily revenue per daily average user(3) | $ | 0.34 |
| $ | 0.22 |
| $ | 0.12 |
| 54.5% | |||||
Mobile penetration(4) | 70% |
| 66% |
| 4 pp |
| 6.1% | ||||||||
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(1) Monthly Active Users and is a count of unique visitors to our site during a month. | |||||||||||||||
(2) Daily Active Users and is a count of unique visitors to our site during a day. | |||||||||||||||
(3) Average daily revenue per DAU is calculated by dividing revenue by the DAU by the number of days for the period. | |||||||||||||||
(4) Mobile penetration = percentage of B2C social gaming revenue derived from mobile platforms. | |||||||||||||||
pp = percentage points. |
BUSINESS IMPROVEMENT INITIATIVE
LIQUIDITY AND CAPITAL RESOURCES
Earnings Conference Call
Scientific Games executive leadership will host a conference call today, March 2, 2017, at 4:30 p.m. EST to review the Company's fourth quarter and full year results. To access the call live via a listen-only webcast and presentation, please visit scientificgames.com/investors/quarterly-earning and click on the webcast link under the Investor Information section. To access the call by telephone, please dial: 1 (412) 317-5413 (U.S. and International) and ask to join the Scientific Games Corporation call. A replay of the webcast will be archived in the Investors section on ScientificGames.com.
About Scientific Games
Scientific Games Corporation (NASDAQ: SGMS) is a leading developer of technology-based products and services and associated content for worldwide gaming, lottery and interactive markets. The Company's portfolio includes gaming machines, game content and systems; table games products and utilities; instant and draw-based lottery games; server-based lottery and gaming systems; sports betting technology; loyalty and rewards programs; and interactive content and services. For more information, please visit www.scientificgames.com.
COMPANY CONTACTS
Investor Relations:
Bill Pfund +1 702-532-7663
Vice President, Investor Relations
bill.pfund@scientificgames.com
Media Relations:
Susan Cartwright +1 702-532-7981
Vice President, Corporate Communications
susan.cartwright@scientificgames.com
MONOPOLY is a trademark of Hasbro. Used with permission. © 2017 Hasbro. All rights reserved.
WILLY WONKA AND THE CHOCOLATE FACTORY and all related characters and elements © Warner Bros. Entertainment Inc. (s17)
All ® notices signify marks registered in the United States. © 2017 Scientific Games Corporation. All Rights Reserved.
Forward-Looking Statements
In this press release, Scientific Games makes "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. 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, including 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; 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, including those relating to gaming licenses and environmental laws; dependence upon key providers in our social gaming business; inability to retain or renew, or unfavorable revisions of, existing contracts, and the inability to enter into new contracts; 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; 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 and reliance on or failures in information technology and other systems;
challenges or disruptions relating to the implementation of a new global enterprise resource planning system; failure to maintain 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; failure to achieve the intended benefits of our acquisitions; incurrence of restructuring costs; implementation of complex revenue recognition standards or other new accounting standards; changes in estimates or judgments related to our impairment analysis of goodwill or other intangible assets; fluctuations in our results due to seasonality and other factors; dependence on suppliers and manufacturers; risks relating to foreign operations, including fluctuations in foreign currency exchange 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 affirmative vote in the U.K. to withdraw from the EU, and the potential impact to our instant lottery game concession or VLT lease arrangements resulting from the recent economic and political conditions in Greece; changes in tax laws or tax rulings, or the examination of our tax positions; 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; influence of certain stockholders; and stock price volatility.
Additional information regarding risks, 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 the Company's current reports on Form 8-K, quarterly reports on Form 10-Q and its latest annual report on Form 10-K filed with the SEC (including under the headings "Forward Looking Statements" and "Risk Factors"). Forward-looking statements speak only as of the date they are made and, except for Scientific Games' ongoing obligations under the U.S. federal securities laws, Scientific Games undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
The Company's management uses the following non-GAAP financial measures in conjunction with GAAP financial measures: AEBITDA, AEBITDA margin, free cash flow and EBITDA from equity investments (each, as described more fully below). These non-GAAP financial measures are presented as supplemental disclosures. They should not be considered in isolation of, as a substitute for, or superior to, the financial information prepared in accordance with GAAP, and should be read in conjunction with the Company's financial statements filed with the SEC. The non-GAAP financial measures used by the Company may differ from similarly titled measures presented by other companies.
Specifically, the Company's management uses AEBITDA and free cash flow to, among other things: (i) monitor and evaluate the performance of the Company's business operations; (ii) facilitate management's internal comparisons of the Company's historical operating performance; and (iii) analyze and evaluate financial and strategic planning decisions regarding future operating investments and operating budgets. In addition, the Company's management uses AEBITDA and AEBITDA margin to facilitate management's external comparisons of the Company's results to the historical operating performance of other companies that may have different capital structures and debt levels. The Company's management uses EBITDA from equity investments to monitor and evaluate the performance of the Company's equity investments.
The Company's management believes that each of these non-GAAP financial measures are useful as they provide investors with information regarding the Company's financial condition and operating performance that is an integral part of management's reporting and planning processes. In particular, the Company's management believes that AEBITDA, both on a consolidated and business segment basis, is helpful because this non-GAAP financial measure eliminates the effects of restructuring, transaction, integration or other items that management believes have less bearing on the Company's ongoing underlying operating performance. Management believes AEBITDA margin, both on a consolidated and business segment basis, is useful for analysts and investors as this measure allows an evaluation of the performance of our ongoing business operations and provides insight into the cash operating income margins generated from our business, from which capital investments are made and debt is serviced. Moreover, management believes AEBITDA and EBITDA from equity investments are useful to investors because the Company's Lottery business is also conducted through a number of equity investments, and those measures eliminate financial items from the equity investees' earnings that management believes have less bearing on the equity investees' performance. Management believes that free cash flow provides useful information regarding the Company's liquidity and its ability to service debt and fund investments. Management also believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for debt repayment and other strategic measures, after making necessary capital investments in property and equipment and necessary license payments to support the Company's ongoing business operations and taking into account cash flows relating to the Company's equity investments.
AEBITDA
AEBITDA, as used herein, is a non-GAAP financial measure that is presented as supplemental disclosure and is reconciled to net income (loss) as the directly comparable GAAP measure, which is further reconciled to operating income (loss) by business segment, as set forth in the schedules titled "Reconciliation of Net Loss to Attributable EBITDA" below. We also present AEBITDA by business segment in this earnings release. AEBITDA should not be considered in isolation of, as a substitute for, or superior to, the financial information prepared in accordance with GAAP, and should be read in conjunction with the Company's financial statements filed with the SEC. AEBITDA may differ from similarly titled measures presented by other companies.
AEBITDA, as used herein, is reconciled to net income (loss) in the following table and includes our net loss with the following adjustments: (1) interest; (2) income taxes; (3) depreciation and amortization expense and impairment charges (including goodwill impairment charges); (4) restructuring and other, which includes charges or expenses attributable to: (i) employee severance; (ii) management changes; (iii) restructuring and integration; (iv) M&A and other, which includes: (a) M&A transaction costs, (b) purchase accounting, (c) unusual items (including legal settlements), and (d) other non-cash items; and (v) cost savings initiatives; and (5) stock-based compensation. In addition to the preceding adjustments, we exclude earnings from equity method investments and add (without duplication) our pro rata share of the EBITDA of our equity investments.
In the third quarter of 2016, we simplified our reconciliation of AEBITDA on a prospective basis. This change does not modify our calculation or definition of AEBITDA or the items that are included as adjustments. This presentation change merely consolidates the amounts previously included in adjustments (4) and (6) above, which were previously reported as two separate line items ("M&A and other charges (incl. purchase accounting)" and "Employee termination and restructuring"), into a single line item ("Restructuring and other") in order to align with our GAAP financial statement presentation.
AEBITDA margin
AEBITDA margin, as used herein, represents our AEBITDA (as defined above) for the three and twelve-month periods ended December 31, 2016 and 2015, each calculated as a percentage of revenue. AEBITDA margin is a non-GAAP financial measure that is presented as supplemental disclosures for illustrative purposes only and is reconciled to net loss in a schedule below. We also present AEBITDA margin by business segment in this release. These amounts are reconciled to consolidated net income (loss) as the nearest GAAP measure, which is further reconciled to operating income (loss) by operating segment.
Free Cash Flow
Free cash flow, as used herein, represents net cash provided by operating activities less total capital expenditures (which includes lottery and gaming systems expenditures and other intangible assets and software expenditures), less payments on license obligations, less additions to equity investments plus distributions of capital on equity investments. Free cash flow is a non-GAAP financial measure that is presented as supplemental disclosure for illustrative purposes only and is reconciled to net cash provided by operating activities in a schedule below. Our definition of "free cash flow" was modified in the first quarter of 2016 to include payments on license obligations, additions to equity investments and distributions of capital on equity investments. In order to enhance comparability, free cash flow for prior periods (including the accompanying tables) has been
conformed to the new definition.
EBITDA from Equity Investments
EBITDA from equity investments, as used herein, represents our share of the EBITDA (i.e., earnings (whether or not distributed to us) plus income tax expense, depreciation and amortization expense and interest (income) expense, net of other) of our joint ventures and minority investees. EBITDA from equity investments is a non-GAAP financial measure that is presented as supplemental disclosure for illustrative purposes only and is reconciled to earnings from equity investments in a schedule below.
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(Unaudited, in millions, except per share amounts) | |||||||
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| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||
| 2016 |
| 2015 |
| 2016 |
| 2015 |
Revenue: |
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Services | $ 353.8 |
| $ 343.0 |
| $ 1,424.0 |
| $ 1,351.8 |
Product sales | 257.9 |
| 252.0 |
| 896.2 |
| 863.0 |
Instant games | 140.5 |
| 142.0 |
| 563.2 |
| 544.0 |
Total revenue | 752.2 |
| 737.0 |
| 2,883.4 |
| 2,758.8 |
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Operating expenses: |
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Cost of services (1) | 102.2 |
| 98.1 |
| 396.5 |
| 372.7 |
Cost of product sales(1) | 124.9 |
| 112.3 |
| 424.6 |
| 405.5 |
Cost of instant games(1) | 72.4 |
| 113.0 |
| 285.2 |
| 325.9 |
Selling, general and administrative | 137.0 |
| 144.1 |
| 577.0 |
| 567.7 |
Research and development | 49.4 |
| 43.1 |
| 204.8 |
| 183.9 |
Depreciation, amortization and impairments | 173.3 |
| 210.3 |
| 738.7 |
| 903.2 |
Goodwill impairments | 69.0 |
| 67.6 |
| 69.0 |
| 1,002.6 |
Restructuring and other | 36.3 |
| 2.9 |
| 57.0 |
| 21.9 |
Total operating expenses | 764.5 |
| 791.4 |
| 2,752.8 |
| 3,783.4 |
Operating (loss) income | (12.3) |
| (54.4) |
| 130.6 |
| (1,024.6) |
Other (expense) income: |
|
|
|
|
|
|
|
Interest expense | (165.0) |
| (167.4) |
| (661.4) |
| (664.9) |
Earnings (loss) from equity investments | (5.5) |
| 7.5 |
| 13.0 |
| 16.9 |
Gain on early extinguishment of debt | - |
| - |
| 25.2 |
| - |
Other income (expense), net | 5.5 |
| (4.2) |
| 13.9 |
| (21.6) |
Total other expense, net | (165.0) |
| (164.1) |
| (609.3) |
| (669.6) |
Net loss before income taxes | (177.3) |
| (218.5) |
| (478.7) |
| (1,694.2) |
Income tax benefit | 66.5 |
| 91.0 |
| 125.0 |
| 299.9 |
Net loss | $ (110.8) |
| $ (127.5) |
| $ (353.7) |
| $ (1,394.3) |
|
|
|
|
|
|
|
|
Basic and diluted net loss per share: |
|
|
|
|
|
|
|
Basic | $ (1.26) |
| $ (1.48) |
| $ (4.05) |
| $ (16.23) |
Diluted | $ (1.26) |
| $ (1.48) |
| $ (4.05) |
| $ (16.23) |
|
|
|
|
|
|
|
|
Weighted average number of shares used in per share calculations: |
|
|
|
|
|
| |
Basic shares | 87.7 |
| 86.3 |
| 87.3 |
| 85.9 |
Diluted shares | 87.7 |
| 86.3 |
| 87.3 |
| 85.9 |
|
|
|
|
|
|
|
|
(1) Exclusive of depreciation and amortization |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
(In millions) | |||
|
|
|
|
| (Unaudited) |
|
|
| December 31, |
| December 31, |
| 2016 |
| 2015 |
Assets: |
|
|
|
Cash and cash equivalents | $ 115.1 |
| $ 128.7 |
Restricted cash | 24.7 |
| 20.2 |
Accounts receivable, net | 495.0 |
| 487.1 |
Notes receivable, net | 125.4 |
| 167.7 |
Inventories | 242.3 |
| 248.5 |
Prepaid expenses, deposits and other current assets | 114.1 |
| 123.3 |
Total current assets | 1,116.6 |
| 1,175.5 |
|
|
|
|
Restricted cash | 17.1 |
| 17.9 |
Notes receivable, net | 48.1 |
| 51.3 |
Property and equipment, net | 612.2 |
| 794.0 |
Goodwill | 2,888.4 |
| 3,013.7 |
Intangible assets, net | 1,768.3 |
| 1,920.0 |
Software, net | 409.1 |
| 485.9 |
Equity investments | 179.9 |
| 228.5 |
Other assets | 47.7 |
| 45.4 |
Total assets | $ 7,087.4 |
| $ 7,732.2 |
|
|
|
|
Liabilities and Stockholders' Deficit: |
|
|
|
Current portion of long-term debt | $ 49.3 |
| $ 50.3 |
Accounts payable | 188.9 |
| 159.8 |
Accrued liabilities | 454.2 |
| 443.8 |
Total current liabilities | 692.4 |
| 653.9 |
|
|
|
|
Deferred income taxes | 70.2 |
| 228.2 |
Other long-term liabilities | 235.6 |
| 188.9 |
Long-term debt, excluding current portion | 8,024.9 |
| 8,156.7 |
Total stockholders' deficit | (1,935.7) |
| (1,495.5) |
Total liabilities and stockholders' deficit | $ 7,087.4 |
| $ 7,732.2 |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited, in millions) | |||||||
|
| ||||||
| Three Months Ended |
| Twelve Months Ended | ||||
| December 31, |
| December 31, | ||||
| 2016 |
| 2015 |
| 2016 |
| 2015 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net loss | $ (110.8) |
| $ (127.5) |
| $ (353.7) |
| $ (1,394.3) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation, amortization and impairments | 173.3 |
| 210.3 |
| 738.7 |
| 903.2 |
Change in deferred income taxes | (63.9) |
| (107.3) |
| (164.6) |
| (330.6) |
Stock-based compensation | 11.8 |
| 5.9 |
| 35.3 |
| 25.4 |
Non-cash interest expense | 10.1 |
| 11.2 |
| 40.4 |
| 40.2 |
Earnings (loss) from equity investments, net | 5.5 |
| (7.5) |
| (13.0) |
| (16.9) |
Distributed earnings from equity investments | 9.7 |
| 4.0 |
| 26.4 |
| 24.9 |
Gain on early extinguishment of debt | - |
| - |
| (25.2) |
| - |
Goodwill impairments | 69.0 |
| 67.6 |
| 69.0 |
| 1,002.6 |
Changes in current assets and liabilities and other | (28.5) |
| 102.0 |
| 65.7 |
| 159.7 |
Net cash provided by operating activities | 76.2 |
| 158.7 |
| 419.0 |
| 414.2 |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Capital expenditures | (58.5) |
| (90.0) |
| (272.9) |
| (323.6) |
Change in other assets and liabilities and other | 13.5 |
| 5.1 |
| 19.6 |
| 15.2 |
Distributions of capital on equity investments | 1.3 |
| 1.7 |
| 25.3 |
| 38.7 |
Change in restricted cash | (0.2) |
| (3.4) |
| (3.7) |
| 5.9 |
Net cash used in investing activities | (43.9) |
| (86.6) |
| (231.7) |
| (263.8) |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Net payments of long-term debt | (17.2) |
| (32.5) |
| (139.7) |
| (141.3) |
Payments on license obligations | (15.7) |
| (8.5) |
| (50.2) |
| (40.5) |
Net redemptions of common stock under stock-based compensation plans and
| (1.4) |
| (1.3) |
| (6.1) |
| (1.4) |
Net cash used in financing activities | (34.3) |
| (42.3) |
| (196.0) |
| (183.2) |
Effect of exchange rate changes on cash and cash equivalents | (3.8) |
| (3.2) |
| (4.9) |
| (10.3) |
(Decrease) increase in cash and cash equivalents | (5.8) |
| 26.6 |
| (13.6) |
| (43.1) |
Cash and cash equivalents, beginning of period | 120.9 |
| 102.1 |
| 128.7 |
| 171.8 |
Cash and cash equivalents, end of period | $ 115.1 |
| $ 128.7 |
| $ 115.1 |
| $ 128.7 |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||||||||
CONSOLIDATED BUSINESS SEGMENT DATA | |||||||||
RECONCILIATION OF NET LOSS TO ATTRIBUTABLE EBITDA | |||||||||
(Unaudited, in millions) | |||||||||
|
|
|
|
|
|
|
|
|
|
| Three Months Ended December 31, 2016 | ||||||||
|
|
|
|
|
|
|
|
| Total |
| Gaming |
| Lottery |
| Interactive |
| Corporate |
| Consolidated |
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Services | $ 220.3 |
| $ 41.9 |
| $ 91.6 |
| $ - |
| $ 353.8 |
Product sales | 240.6 |
| 17.3 |
| - |
| - |
| 257.9 |
Instant games | - |
| 140.5 |
| - |
| - |
| 140.5 |
Total revenue | $ 460.9 |
| $ 199.7 |
| $ 91.6 |
| $ - |
| $ 752.2 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Cost of services (1) | $ 39.6 |
| $ 28.6 |
| $ 34.0 |
| $ - |
| $ 102.2 |
Cost of product sales (1) | 112.4 |
| 12.5 |
| - |
| - |
| 124.9 |
Cost of instant games (1) | - |
| 72.4 |
| - |
| - |
| 72.4 |
Selling, general and administrative | 55.7 |
| 15.6 |
| 33.6 |
| 32.1 |
| 137.0 |
Research and development | 37.9 |
| 4.6 |
| 5.1 |
| 1.8 |
| 49.4 |
Depreciation, amortization and impairments | 135.3 |
| 16.3 |
| 3.7 |
| 18.0 |
| 173.3 |
Goodwill impairment | - |
| 69.0 |
| - |
| - |
| 69.0 |
Restructuring and other | 9.6 |
| 6.9 |
| 1.5 |
| 18.3 |
| 36.3 |
Operating income (loss) | $ 70.4 |
| $ (26.2) |
| $ 13.7 |
| $ (70.2) |
| $ (12.3) |
|
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
| $ (165.0) |
Earnings (loss) from equity investments | $ 3.2 |
| $ (8.7) |
| $ - |
| $ - |
| (5.5) |
Other income, net |
|
|
|
|
|
| 5.5 |
| 5.5 |
Total other expense, net |
|
|
|
|
|
|
|
| $ (165.0) |
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes |
|
|
|
|
|
|
|
| $ (177.3) |
Income tax benefit |
|
|
|
|
|
|
|
| 66.5 |
Net loss |
|
|
|
|
|
|
|
| $ (110.8) |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Loss to Attributable EBITDA | |||||||||
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
| $ (110.8) |
Restructuring and other (3) | $ 9.6 |
| $ 6.9 |
| $ 1.5 |
| $ 18.3 |
| 36.3 |
Goodwill impairment | - |
| 69.0 |
| - |
| - |
| 69.0 |
Depreciation, amortization and impairments | 135.3 |
| 16.3 |
| 3.7 |
| 18.0 |
| 173.3 |
Other expense, net |
|
|
|
|
|
| (4.0) |
| (4.0) |
Interest expense |
|
|
|
|
|
|
|
| 165.0 |
Income tax benefit |
|
|
|
|
|
|
|
| (66.5) |
Stock-based compensation | 1.7 |
| 1.3 |
| 0.8 |
| 8.0 |
| 11.8 |
EBITDA from equity investments (2) | 2.1 |
| 11.8 |
| - |
| - |
| 13.9 |
Earnings (loss) from equity investments | (3.2) |
| 8.7 |
| - |
| - |
| 5.5 |
Attributable EBITDA | $ 219.1 |
| $ 79.1 |
| $ 19.7 |
| $ (24.4) |
| $ 293.5 |
|
|
|
|
|
|
|
|
|
|
Reconciliation to Attributable EBITDA margin | |||||||||
Attributable EBITDA | $ 219.1 |
| $ 79.1 |
| $ 19.7 |
| $ (24.4) |
| $ 293.5 |
Revenue | $ 460.9 |
| $ 199.7 |
| $ 91.6 |
| - |
| $ 752.2 |
Attributable EBITDA margin | 47.5% |
| 39.6% |
| 21.5% |
|
|
| 39.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Exclusive of depreciation and amortization. | |||||||||
(2) The Company received $11 million in cash distributions and return of capital payments from its equity investees. | |||||||||
(3) Refer to AEBITDA definition for description of items included in this line. |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BUSINESS SEGMENT DATA | ||||||||||
RECONCILIATION OF NET LOSS TO ATTRIBUTABLE EBITDA | ||||||||||
(Unaudited, in millions) | ||||||||||
|
|
|
|
|
|
|
|
|
| |
| Twelve Months Ended December 31, 2016 | |||||||||
|
|
|
|
|
|
|
|
| Total | |
| Gaming |
| Lottery |
| Interactive |
| Corporate |
| Consolidated | |
|
|
|
|
|
|
|
|
|
| |
Revenue: |
|
|
|
|
|
|
|
|
| |
Services | $ 921.8 |
| $ 169.4 |
| $ 332.8 |
| $ - |
| $ 1,424.0 | |
Product sales | 850.9 |
| 45.3 |
| - |
| - |
| 896.2 | |
Instant games | - |
| 563.2 |
| - |
| - |
| 563.2 | |
Total revenue | $ 1,772.7 |
| $ 777.9 |
| $ 332.8 |
| $ - |
| $ 2,883.4 | |
|
|
|
|
|
|
|
|
|
| |
Operating expenses: |
|
|
|
|
|
|
|
|
| |
Cost of services (1) | $ 165.1 |
| $ 109.9 |
| $ 121.5 |
| $ - |
| $ 396.5 | |
Cost of product sales (1) | 390.6 |
| 34.0 |
| - |
| - |
| 424.6 | |
Cost of instant games (1) | - |
| 285.2 |
| - |
| - |
| 285.2 | |
Selling, general and administrative | 248.0 |
| 70.2 |
| 118.0 |
| 140.8 |
| 577.0 | |
Research and development | 157.2 |
| 11.5 |
| 28.3 |
| 7.8 |
| 204.8 | |
Depreciation, amortization and impairments | 585.2 |
| 66.5 |
| 14.9 |
| 72.1 |
| 738.7 | |
Goodwill impairment | - |
| 69.0 |
| - |
| - |
| 69.0 | |
Restructuring and other | 14.6 |
| 8.7 |
| 1.6 |
| 32.1 |
| 57.0 | |
Operating income (loss) | $ 212.0 |
| $ 122.9 |
| $ 48.5 |
| $ (252.8) |
| $ 130.6 | |
|
|
|
|
|
|
|
|
|
| |
Other (expense) income: |
|
|
|
|
|
|
|
|
| |
Interest expense |
|
|
|
|
|
|
|
| $ (661.4) | |
Earnings from equity investments | $ 4.7 |
| $ 8.3 |
| $ - |
| $ - |
| 13.0 | |
Gain on early extinguishment of debt |
|
|
|
|
|
| 25.2 |
| 25.2 | |
Other income, net |
|
|
|
|
|
| 13.9 |
| 13.9 | |
Total other expense, net |
|
|
|
|
|
|
|
| $ (609.3) | |
|
|
|
|
|
|
|
|
|
| |
Net loss before income taxes |
|
|
|
|
|
|
|
| $ (478.7) | |
Income tax benefit |
|
|
|
|
|
|
|
| 125.0 | |
Net loss |
|
|
|
|
|
|
|
| $ (353.7) | |
|
|
|
|
|
|
|
|
|
| |
Reconciliation of Net Loss to Attributable EBITDA | ||||||||||
|
|
|
|
|
|
|
|
|
| |
Net loss |
|
|
|
|
|
|
|
| $ (353.7) | |
Restructuring and other (3)(4) | $ 8.7 |
| $ 8.7 |
| $ 1.6 |
| $ 35.8 |
| 54.8 | |
Goodwill impairment |
|
| 69.0 |
|
|
| - |
| 69.0 | |
Depreciation, amortization and impairments | 585.2 |
| 66.5 |
| 14.9 |
| 72.1 |
| 738.7 | |
Other expense, net |
|
|
|
|
|
| (8.9) |
| (8.9) | |
Interest expense |
|
|
|
|
|
|
|
| 661.4 | |
Income tax benefit |
|
|
|
|
|
|
|
| (125.0) | |
Stock-based compensation | 7.4 |
| 4.1 |
| 1.9 |
| 21.9 |
| 35.3 | |
Gain on early extinguishment of debt |
|
|
|
|
|
| (25.2) |
| (25.2) | |
EBITDA from equity investments (2) | 8.3 |
| 61.9 |
| - |
| - |
| 70.2 | |
Earnings from equity investments | (4.7) |
| (8.3) |
| - |
| - |
| (13.0) | |
Attributable EBITDA | $ 821.6 |
| $ 333.1 |
| $ 66.9 |
| $ (118.0) |
| $ 1,103.6 | |
|
|
|
|
|
|
|
|
|
| |
Reconciliation to Attributable EBITDA margin | ||||||||||
Attributable EBITDA | $ 821.6 |
| $ 333.1 |
| $ 66.9 |
| $ (118.0) |
| $ 1,103.6 | |
Revenue | $ 1,772.7 |
| $ 777.9 |
| $ 332.8 |
| - |
| $ 2,883.4 | |
Attributable EBITDA margin | 46.3% |
| 42.8% |
| 20.1% |
|
|
| 38.3% | |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
(1) Exclusive of depreciation and amortization | ||||||||||
(2) The Company received $51.7 million in cash distributions and return of capital payments from its equity investees | ||||||||||
(3) Includes $7.5 million of insurance proceeds related to a settlement of a legal matter | ||||||||||
(4) Refer to AEBITDA definition for description of items included in this line |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BUSINESS SEGMENT DATA | ||||||||||
RECONCILIATION OF NET LOSS TO ATTRIBUTABLE EBITDA | ||||||||||
(Unaudited, in millions) | ||||||||||
|
|
|
|
|
|
|
|
|
| |
| Three Months Ended December 31, 2015 | |||||||||
|
|
|
|
|
|
|
|
| Total | |
| Gaming |
| Lottery |
| Interactive |
| Corporate |
| Consolidated | |
|
|
|
|
|
|
|
|
|
| |
Revenue: |
|
|
|
|
|
|
|
|
| |
Services | $ 233.7 |
| $ 49.0 |
| $ 60.3 |
| $ - |
| $ 343.0 | |
Product sales | 235.3 |
| 16.7 |
| - |
| - |
| 252.0 | |
Instant games | - |
| 142.0 |
| - |
| - |
| 142.0 | |
Total revenue | $ 469.0 |
| $ 207.7 |
| $ 60.3 |
| $ - |
| $ 737.0 | |
|
|
|
|
|
|
|
|
|
| |
Operating expenses: |
|
|
|
|
|
|
|
|
| |
Cost of services (1) | $ 50.2 |
| $ 26.7 |
| $ 21.2 |
| $ - |
| $ 98.1 | |
Cost of product sales (1) | 101.4 |
| 10.9 |
| - |
| - |
| 112.3 | |
Cost of instant games (1) | - |
| 113.0 |
| - |
| - |
| 113.0 | |
Selling, general and administrative | 69.4 |
| 17.8 |
| 19.4 |
| 37.5 |
| 144.1 | |
Research and development | 34.6 |
| 2.1 |
| 6.4 |
| - |
| 43.1 | |
Depreciation and amortization | 158.7 |
| 33.0 |
| 3.7 |
| 14.9 |
| 210.3 | |
Goodwill impairment | - |
| 67.6 |
| - |
| - |
| 67.6 | |
Restructuring and other | 1.1 |
| - |
| - |
| 1.8 |
| 2.9 | |
Operating income (loss) | $ 53.6 |
| $ (63.4) |
| $ 9.6 |
| $ (54.2) |
| $ (54.4) | |
|
|
|
|
|
|
|
|
|
| |
Other (expense) income: |
|
|
|
|
|
|
|
|
| |
Interest expense |
|
|
|
|
|
|
|
| $ (167.4) | |
Earnings from equity investments | $ 0.8 |
| $ 6.7 |
| $ - |
| $ - |
| 7.5 | |
Other expense, net |
|
|
|
|
|
| (4.2) |
| (4.2) | |
Total other expense, net |
|
|
|
|
|
|
|
| $ (164.1) | |
|
|
|
|
|
|
|
|
|
| |
Net loss before income taxes |
|
|
|
|
|
|
|
| $ (218.5) | |
Income tax benefit |
|
|
|
|
|
|
|
| 91.0 | |
Net loss |
|
|
|
|
|
|
|
| $ (127.5) | |
|
|
|
|
|
|
|
|
|
| |
Reconciliation of Net Loss to Attributable EBITDA |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
Net loss |
|
|
|
|
|
|
|
| $ (127.5) | |
Restructuring and other (2)(3) | $ 1.1 |
| $ - |
| $ - |
| $ 1.8 |
| 2.9 | |
M&A and other charges (incl. purchase accounting) (2)
| 2.0 |
| - |
| - |
| - |
| 2.0 | |
Legal contingencies and settlements (2) | 2.5 |
| - |
| - |
| - |
| 2.5 | |
Other asset impairments | - |
| 35.5 |
| - |
| - |
| 35.5 | |
Goodwill impairment | - |
| 67.6 |
| - |
| - |
| 67.6 | |
Depreciation and amortization: |
|
|
|
|
|
|
|
|
| |
Other long term asset impairments and write-downs (2) | 14.4 |
| 11.9 |
| - |
| - |
| 26.3 | |
Other | 144.3 |
| 21.1 |
| 3.7 |
| 14.9 |
| 184.0 | |
Other expense, net |
|
|
|
|
|
| 6.3 |
| 6.3 | |
Interest expense |
|
|
|
|
|
|
|
| 167.4 | |
Income tax benefit |
|
|
|
|
|
|
|
| (91.0) | |
Stock-based compensation | 1.8 |
| 1.0 |
| 0.2 |
| 2.9 |
| 5.9 | |
EBITDA from equity investments (4) | 1.6 |
| 16.9 |
| - |
| - |
| 18.5 | |
Earnings from equity investments | (0.8) |
| (6.7) |
| - |
| - |
| (7.5) | |
Attributable EBITDA | $ 221.3 |
| $ 90.6 |
| $ 13.5 |
| $ (32.5) |
| $ 292.9 | |
|
|
|
|
|
|
|
|
|
| |
Reconciliation to Attributable EBITDA margin | ||||||||||
Attributable EBITDA | $ 221.3 |
| $ 90.6 |
| $ 13.5 |
| $ (32.5) |
| $ 292.9 | |
Revenue | $ 469.0 |
| $ 207.7 |
| $ 60.3 |
| - |
| $ 737.0 | |
Attributable EBITDA margin | 47.2% |
| 43.6% |
| 22.4% |
|
|
| 39.7% | |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
(1) Exclusive of depreciation and amortization. | ||||||||||
(2) Total income tax benefit on these items is $13.0 million. | ||||||||||
(3) Refer to AEBITDA definition for description of items included in this line. | ||||||||||
(4) The Company received $5.6 million in cash distributions and return of capital payments from its equity investees. |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||||||||
CONSOLIDATED BUSINESS SEGMENT DATA | |||||||||
RECONCILIATION OF NET LOSS TO ATTRIBUTABLE EBITDA | |||||||||
(Unaudited, in millions) | |||||||||
|
| ||||||||
| Twelve Months Ended December 31, 2015 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| Gaming |
| Lottery |
| Interactive |
| Corporate |
| Consolidated |
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Services | $ 956.3 |
| $ 185.5 |
| $ 210.0 |
| $ - |
| $ 1,351.8 |
Product sales | 817.3 |
| 45.7 |
| - |
| - |
| 863.0 |
Instant games | - |
| 544.0 |
| - |
| - |
| 544.0 |
Total revenue | $ 1,773.6 |
| $ 775.2 |
| $ 210.0 |
| $ - |
| $ 2,758.8 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Cost of services (1) | $ 190.1 |
| $ 109.8 |
| $ 72.8 |
| $ - |
| $ 372.7 |
Cost of product sales (1) | 370.2 |
| 35.3 |
| - |
| - |
| 405.5 |
Cost of instant games (1) | - |
| 325.9 |
| - |
| - |
| 325.9 |
Selling, general and administrative | 285.1 |
| 67.0 |
| 66.3 |
| 149.3 |
| 567.7 |
Research and development | 154.9 |
| 6.3 |
| 22.7 |
| - |
| 183.9 |
Depreciation and amortization | 728.6 |
| 95.9 |
| 19.6 |
| 59.1 |
| 903.2 |
Goodwill impairments | 935.0 |
| 67.6 |
| - |
| - |
| 1,002.6 |
Restructuring and other | 11.2 |
| 0.2 |
| 1.5 |
| 9.0 |
| 21.9 |
Operating income (loss) | $ (901.5) |
| $ 67.2 |
| $ 27.1 |
| $ (217.4) |
| $ (1,024.6) |
|
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
| $ (664.9) |
Earnings from equity investments | $ 3.5 |
| $ 13.4 |
| $ - |
| $ - |
| 16.9 |
Other expense, net |
|
|
|
|
|
| (21.6) |
| (21.6) |
Total other expense, net |
|
|
|
|
|
|
|
| $ (669.6) |
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes |
|
|
|
|
|
|
|
| $ (1,694.2) |
Income tax benefit |
|
|
|
|
|
|
|
| 299.9 |
Net loss |
|
|
|
|
|
|
|
| $ (1,394.3) |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Loss to Attributable EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
| $ (1,394.3) |
Restructuring and other (2)(3) | $ 11.2 |
| $ 0.2 |
| $ 1.5 |
| $ 9.0 |
| 21.9 |
M&A and other charges (incl. purchase accounting) (2) | 26.8 |
| 0.2 |
| - |
| 5.5 |
| 32.5 |
Legal contingencies and settlements (2) | 2.5 |
| - |
| - |
| - |
| 2.5 |
Inventory write-down for discontinued product lines (2) | 5.9 |
| - |
| - |
| - |
| 5.9 |
Other assets impairments | - |
| 35.5 |
| - |
| - |
| 35.5 |
Goodwill impairments | 935.0 |
| 67.6 |
| - |
| - |
| 1,002.6 |
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
Other long term asset impairments and write-downs (2) | 155.9 |
| 13.8 |
| - |
| - |
| 169.7 |
Other | 572.7 |
| 82.1 |
| 19.6 |
| 59.1 |
| 733.5 |
Other expense, net |
|
|
|
|
|
| 27.9 |
| 27.9 |
Interest expense |
|
|
|
|
|
|
|
| 664.9 |
Income tax benefit |
|
|
|
|
|
|
|
| (299.9) |
Stock-based compensation | 8.1 |
| 4.7 |
| 0.8 |
| 11.8 |
| 25.4 |
EBITDA from equity investments (4) | 7.1 |
| 56.9 |
| - |
| - |
| 64.0 |
Earnings from equity investments | (3.5) |
| (13.4) |
| - |
| - |
| (16.9) |
Attributable EBITDA | $ 823.7 |
| $ 328.2 |
| $ 49.0 |
| $ (125.7) |
| $ 1,075.2 |
|
|
|
|
|
|
|
|
|
|
Reconciliation to Attributable EBITDA margin | |||||||||
Attributable EBITDA | $ 823.7 |
| $ 328.2 |
| $ 49.0 |
| $ (125.7) |
| $ 1,075.2 |
Revenue | $ 1,773.6 |
| $ 775.2 |
| $ 210.0 |
| - |
| $ 2,758.8 |
Attributable EBITDA margin | 46.4% |
| 42.3% |
| 23.3% |
|
|
| 39.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Exclusive of depreciation and amortization. | |||||||||
(2) Total income tax benefit on these items is $89.5 million. | |||||||||
(3) Refer to AEBITDA definition for description of items included in this line. | |||||||||
(4) The Company received $63.5 million in cash distributions and return of capital payments from its equity investees. |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | ||||||||
CALCULATION OF FREE CASH FLOW | ||||||||
(Unaudited, in millions) | ||||||||
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | |||||
| 2016 |
| 2015 |
| 2016 |
| 2015 | |
|
|
|
|
|
|
|
| |
Net cash provided by operating activities | $ 76.2 |
| $ 158.7 |
| $ 419.0 |
| $ 414.2 | |
|
|
|
|
|
|
|
| |
Less: Capital expenditures | (58.5) |
| (90.0) |
| (272.9) |
| (323.6) | |
Add: Distributions of capital on equity investments | 1.3 |
| 1.7 |
| 25.3 |
| 38.7 | |
Less: Additions to equity investments | (1.2) |
| (2.7) |
| (1.2) |
| (2.7) | |
Less: Payments on license obligations | (15.7) |
| (8.5) |
| (50.2) | ` | (40.5) | |
|
|
|
|
|
|
|
| |
Free cash flow | $ 2.1 |
| $ 59.2 |
| $ 120.0 |
| $ 86.1 |
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||||||
RECONCILIATION OF EARNINGS (LOSS) FROM EQUITY INVESTMENT TO EBITDA FROM EQUITY INVESTMENTS | |||||||
(Unaudited, in millions) | |||||||
|
|
|
|
|
|
|
|
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||
| 2016 |
| 2015 |
| 2016 |
| 2015 |
EBITDA from equity investments (1): |
|
|
|
|
|
|
|
(Loss) earnings from equity investments (2) | $ (5.5) |
| $ 7.5 |
| $ 13.0 |
| $ 16.9 |
Add: Income tax expense | 1.1 |
| 3.1 |
| 8.3 |
| 8.4 |
Add: Depreciation and amortization | 8.7 |
| 8.9 |
| 35.2 |
| 36.2 |
Add: Interest expense, net of other | 9.6 |
| (1.0) |
| 13.7 |
| 2.5 |
EBITDA from equity investments | $ 13.9 |
| $ 18.5 |
| $ 70.2 |
| $ 64.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) EBITDA from equity investments includes results from the Company's participation in LNS, RCN, ITL, CSG, Beijing | |||||||
Guard Libang Technology Co., Ltd., Northstar Illinois, Northstar New Jersey Lottery Group, LLC, and Hellenic Lotteries. | |||||||
(2) Includes $11.3 million impairment charge recorded during the fourth quarter of 2016. |
| |||||||||||||
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES | |||||||||||||
SUPPLEMENTAL INFORMATION - SEGMENT KEY PERFORMANCE INDICATORS AND SUPPLEMENTAL REVENUE METRICS | |||||||||||||
(Unaudited, in millions, except unit, per unit data and ARPDAU) | |||||||||||||
|
|
|
|
|
| ||||||||
The table below presents certain key performance indicators and supplemental revenue metrics. The information set forth in the table below should
| |||||||||||||
| |||||||||||||
| Three Months Ended | ||||||||||||
| Dec 31, |
| Dec 31, |
| Sept 30, | ||||||||
Gaming Revenue - Supplemental Revenue Metrics | 2016 |
| 2015 |
| 2016 | ||||||||
Revenue by Lines of Business: |
|
|
|
|
| ||||||||
Gaming operations revenue | $ 172.6 |
| $ 186.1 |
| $ 186.0 | ||||||||
Gaming machine sales revenue | 169.5 |
| 174.1 |
| 154.4 | ||||||||
Gaming systems revenue | 63.9 |
| 68.6 |
| 59.5 | ||||||||
Table products revenue | 54.9 |
| 40.2 |
| 42.0 | ||||||||
Gaming revenue | $ 460.9 |
| $ 469.0 |
| $ 448.2 | ||||||||
|
|
|
|
|
| ||||||||
Gaming operations: |
|
|
|
|
| ||||||||
Wide-area progressive, premium and daily-fee participation revenue (1) | $ 98.2 |
| $ 107.7 |
| $ 103.4 | ||||||||
Other leased, participation and services revenue (2) | 74.4 |
| 78.4 |
| 79.0 | ||||||||
Gaming operations revenue | $ 172.6 |
| $ 186.1 |
| $ 182.4 | ||||||||
|
|
|
|
|
| ||||||||
Gaming machine sales: |
|
|
|
|
| ||||||||
Gaming machine and other product sales revenue | $ 169.5 |
| $ 174.1 |
| $ 159.8 | ||||||||
|
|
|
|
|
| ||||||||
Gaming systems: |
|
|
|
|
| ||||||||
Hardware, software and services revenue | $ 37.2 |
| $ 42.5 |
| $ 31.1 | ||||||||
Maintenance revenue | 26.7 |
| 26.1 |
| 26.5 | ||||||||
Gaming systems revenue | $ 63.9 |
| $ 68.6 |
| $ 57.6 | ||||||||
|
|
|
|
|
| ||||||||
Table products: |
|
|
|
|
| ||||||||
Table products sales revenue | $ 23.9 |
| $ 11.0 |
| $ 17.7 | ||||||||
Leased table products revenue | 31.0 |
| 29.2 |
| 30.7 | ||||||||
Table products revenue | $ 54.9 |
| $ 40.2 |
| $ 48.4 | ||||||||
|
|
|
|
|
| ||||||||
Gaming Revenue - Key Performance Indicators |
|
|
|
|
| ||||||||
Gaming Operations |
|
|
|
|
| ||||||||
Wide-area progressive, premium and daily-fee participation units (1): |
|
|
|
| |||||||||
Installed base at period end | 21,465 |
| 22,252 |
| 21,663 | ||||||||
Average daily revenue per unit | $ 49.49 |
| $ 52.46 |
| $ 51.61 | ||||||||
|
|
|
|
|
| ||||||||
Other participation and leased units (2): |
|
|
|
|
| ||||||||
Installed base at period end | 47,474 |
| 47,949 |
| 47,828 | ||||||||
Average daily revenue per unit | $ 14.52 |
| $ 15.57 |
| $ 15.31 | ||||||||
|
|
|
|
|
| ||||||||
Gaming Machine Sales |
|
|
|
|
| ||||||||
U.S. and Canadian new unit shipments | 5,115 |
| 5,366 |
| 4,022 | ||||||||
International new unit shipments | 4,119 |
| 3,624 |
| 3,938 | ||||||||
New unit shipments | 9,234 |
| 8,990 |
| 7,960 | ||||||||
Average sales price per new unit | $ 16,268 |
| $ 17,137 |
| $ 16,824 | ||||||||
|
|
|
|
|
| ||||||||
Lottery Revenue - Supplemental Revenue Metrics |
|
|
|
|
| ||||||||
Lottery Revenue: |
|
|
|
|
| ||||||||
Instant games revenue | $ 140.5 |
| $ 142.0 |
| $ 137.7 | ||||||||
Services revenue | 41.9 |
| 49.0 |
| 38.3 | ||||||||
Product sales revenue | 17.3 |
| 16.7 |
| 10.6 | ||||||||
Lottery revenue | $ 199.7 |
| $ 207.7 |
| $ 186.6 | ||||||||
|
|
|
|
|
| ||||||||
Instant games revenue by geography: |
|
|
|
|
| ||||||||
United States | $ 88.7 |
| $ 91.0 |
| $ 94.8 | ||||||||
International | 51.8 |
| 51.0 |
| 42.9 | ||||||||
Instant games revenue | $ 140.5 |
| $ 142.0 |
| $ 137.7 | ||||||||
|
|
|
|
|
| ||||||||
Services revenue by geography: |
|
|
|
|
| ||||||||
United States | $ 29.7 |
| $ 30.4 |
| $ 26.6 | ||||||||
International | 12.2 |
| 18.6 |
| 11.7 | ||||||||
Services revenue | $ 41.9 |
| $ 49.0 |
| $ 38.3 | ||||||||
|
|
|
|
|
| ||||||||
Product sales revenue by geography: |
|
|
|
|
| ||||||||
United States | $ 0.5 |
| $ 1.3 |
| $ 1.7 | ||||||||
International | 16.8 |
| 15.4 |
| 8.9 | ||||||||
Product sales revenue | $ 17.3 |
| $ 16.7 |
| $ 10.6 | ||||||||
|
|
|
|
|
| ||||||||
Lottery Revenue - Key Performance Indicators |
|
|
|
|
| ||||||||
Change in retail sales of U.S. lottery instant games customers (3)(4) | 1.3% |
| 9.2% |
| 2.2% | ||||||||
Change in retail sales of U.S. lottery systems contract customers (3)(5) | 1.3% |
| 1.9% |
| 3.7% | ||||||||
Change in Italy retail sales of instant games (3) | -4.0% |
| -1.5% |
| -0.6% | ||||||||
|
|
|
|
|
| ||||||||
|
|
|
|
|
| ||||||||
Interactive Revenue - Supplemental Revenue Metrics |
|
|
|
|
| ||||||||
Revenue by Lines of Business: |
|
|
|
|
| ||||||||
Social gaming B2C | $ 74.8 |
| $ 49.2 |
| $ 70.3 | ||||||||
Other interactive B2B | 16.8 |
| 11.1 |
| 14.9 | ||||||||
Interactive revenue | $ 91.6 |
| $ 60.3 |
| $ 85.2 | ||||||||
|
|
|
|
|
| ||||||||
Interactive Revenue - Key Performance Indicators |
|
|
|
|
| ||||||||
Social gaming B2C: |
|
|
|
|
| ||||||||
Average monthly active users (6) | 7.7 |
| 8.1 |
| 8.0 | ||||||||
Average daily active users (7) | 2.4 |
| 2.3 |
| 2.5 | ||||||||
Average daily revenue per daily active user (8) | $ 0.34 |
| $ 0.22 |
| $ 0.31 | ||||||||
Mobile penetration (9) | 70% |
| 66% |
| 69% | ||||||||
|
|
|
|
|
| ||||||||
(1) Wide-area progressive, premium and daily-fee participation units comprise participation gaming machines, generally without fixed-term lease
| |||||||||||||
(2) Other leased, participation and services units comprise server-based gaming machines, video lottery terminals, centrally determined gaming
| |||||||||||||
(3) Information provided by third-party lottery operators. | |||||||||||||
(4) U.S. instant games customers' retail sales include only sales of instant games. | |||||||||||||
(5) U.S. lottery systems customers' retail sales primarily include sales of draw games, keno and instant games validated by the relevant system. | |||||||||||||
(6) Monthly Active Users and is a count of unique visitors to our site during a month. | |||||||||||||
(7) Daily Active Users and is a count of unique visitors to our site during a day. | |||||||||||||
(8) Average daily revenue per DAU is calculated by dividing revenue by the DAU by the number of days in the period. | |||||||||||||
(9) Mobile penetration = percentage of B2C social gaming revenue derived from mobile platforms. |