Consolidated Financial Statements

3 Months Ended

Mar. 31, 2012

Consolidated Financial Statements [Abstract]

Consolidated Financial Statements

Consolidated Financial Statements

Basis of Presentation

The Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011, the Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2012 and 2011, and the Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011, have been prepared by Scientific Games Corporation and are unaudited. When used in these notes, the terms “we,” “us,” “our” and the “Company” refer to Scientific Games Corporation and all entities included in our consolidated financial statements unless otherwise specified or the context otherwise indicates. In the opinion of management, all adjustments necessary to present fairly our consolidated financial position as of March 31, 2012, our results of operations and comprehensive income for the three months ended March 31, 2012 and 2011, and our cash flows for the three months ended March 31, 2012 and 2011 have been made. Such adjustments are of a normal, recurring nature.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2011 Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results of operations for the full year.

Significant Accounting Policies

We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in our 2011 Annual Report on Form 10-K. We summarize recently issued accounting guidance that we adopted on January 1, 2012 below:

In May 2011, the Financial Accounting Standards Board ("FASB") issued guidance to amend the accounting and disclosure requirements on fair value measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs.

In June 2011, the FASB issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity is required to present net income and other comprehensive income either in one continuous statement or in two separate but consecutive statements. The new guidance also requires presentation of reclassification adjustments from other comprehensive income to net income on the face of the financial statements. However, the effective date pertaining to this requirement was deferred by an update issued by the FASB in December 2011. The Company adopted the new guidance on January 1, 2012 resulting in a change in the presentation of comprehensive income for the three months ended March 31, 2012 and 2011.

In September 2011, the FASB issued guidance on testing goodwill for impairment. The new guidance provides an entity with the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines the fair value of a reporting unit is less than its carrying amount, the two-step goodwill impairment test is required. We will apply the new guidance to our December 31, 2012 annual goodwill impairment evaluation.

Basic and Diluted Net Income (Loss) Per Share

The following represents a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) per share available to common stockholders for the three months ended March 31, 2012 and 2011:

	Three Months Ended
	March 31,
	2012		2011
Income (numerator)
Net income (loss)	$	1,819	$	(6,932	)
Shares (denominator)
Weighted average basic common shares outstanding	92,484		91,886
Effect of dilutive securities-stock rights	1,740		—
Weighted average diluted common shares outstanding	94,224		91,886
Basic and diluted per share amounts
Basic net income (loss) per share	$	0.02	$	(0.08	)
Diluted net income (loss) per share	$	0.02	$	(0.08	)

The weighted average diluted common shares outstanding for the three months ended March 31, 2012 and 2011 excludes the effect of approximately 2,703 and 7,409 weighted average stock rights outstanding, respectively, because their effect would be anti-dilutive. For the three months ended March 31, 2011, there were no dilutive stock rights due to the net loss reported for the period.