Acquisitions and Dispositions

Acquisitions

On July 19, 2012, we acquired substantially all of the assets of Parspro.com ehf ("Parspro") for approximately $11,800. Parspro is a provider of sports betting systems and related products via point of sale terminals, the internet and mobile devices. Approximately $9,900 of the $11,800 purchase price was in excess of the preliminary fair value of the acquired net assets and has been allocated to goodwill. The acquired assets include technology that we have integrated into our Lottery Systems business and our interactive games platform as part of an expanded service offering to lottery customers. Had the operating results of Parspro been included as if the transaction was consummated on January 1, 2011, our pro forma results of operations for the years ended December 31, 2012 and 2011 would not have been materially different.

On June 8, 2012, we acquired 100% of the equity interests of Provoloto for approximately $9,720, subject to certain adjustments, including an estimated earn-out payable to the sellers of approximately $2,000 contingent on the future performance of the acquired business. Provoloto develops and distributes instant lottery tickets and manages instant ticket lotteries for Mexican charities. We expect this acquisition to strengthen our presence in Latin America and create a platform for further expansion in the region. Approximately $5,100 of the $9,720 purchase price was in excess of the preliminary fair value of the acquired net assets and has been allocated to goodwill. The operating results of Provoloto have been included in our Printed Products segment and have been consolidated in our results of operations since the date of acquisition. Had the operating results of Provoloto been included as if the transaction was consummated on January 1, 2011, our pro forma results of operations for the years ended December 31, 2012 and 2011 would not have been materially different.

On June 7, 2012, we acquired ADS/Technology and Gaming, Ltd. ("ADS") for £3,450, subject to certain adjustments. ADS provides maintenance and other services for LBOs in the U.K. We have integrated ADS into our existing Gaming business. We expect that the acquisition will allow us to expand our service offering to the LBOs. Approximately £2,200 of the £3,450 purchase price was in excess of the preliminary fair value of the acquired net assets and has been allocated to goodwill. The operating results of ADS have been included in our Gaming segment and have been consolidated in our results of operations since the date of acquisition. Had the operating results of ADS been included as if the transaction was consummated

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

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(in thousands, except per share amounts)

(3) Acquisitions and Dispositions (Continued)

on January 1, 2011, our pro forma results of operations for the years ended December 31, 2012 and 2011 would not have been materially different.

On September 23, 2011 we acquired Barcrest Group Limited ("Barcrest"), a leading supplier of gaming content and machines in Europe, from subsidiaries of International Game Technology for approximately £33,000 in cash (subject to certain adjustments). Barcrest has been integrated with our existing Gaming business.

Subsequent to the filing of our 2011 Annual Report on Form 10-K, we adjusted the estimated fair values of certain of the assets acquired as part of our acquisition of Barcrest on September 23, 2011 to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date. The adjustments resulted in an increase in goodwill of approximately $2,040, an increase in other assets of approximately $1,490, a decrease in inventory of approximately $1,970, a decrease in the current portion of deferred income taxes of approximately $1,090 and a decrease in prepaid expenses, deposits and other current assets of approximately $470. We have applied the adjustment retrospectively to the Consolidated Balance Sheet as of December 31, 2011.

The following table summarizes the adjusted fair values of the assets acquired and liabilities assumed at the acquisition date based on a final purchase price allocation:

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

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(in thousands, except per share amounts)

(3) Acquisitions and Dispositions (Continued)




At September 23, 2011
Cash and cash equivalents	$	1,900
Accounts receivable, net of allowance of doubtful accounts of approximately $2,000 as of September 23, 2011	22,600
Inventories	7,500
Prepaid expenses, deposits and other current assets	1,800
Property and equipment	14,500
Deferred income taxes	100
Other long-term assets	2,500
Intangible assets	12,000

Total identifiable assets acquired	62,900
Accounts payable	7,700
Accrued liabilities	11,100
Long-term deferred income tax liabilities	2,100

Net identifiable assets acquired	42,000
Goodwill	6,400

Net assets acquired	$	48,400

Of the approximate $12,000 of acquired intangible assets, approximately $900 was allocated to trade names and is not subject to amortization. The remaining $11,100 of intangible assets includes customer lists of approximately $5,700 (with a four-year weighted average useful life) and intellectual property of approximately $5,400 (with a 4.5-year weighted average useful life).

The approximate $6,400 of goodwill was assigned to our Gaming segment. None of the goodwill is expected to be deductible for income tax purposes.

We recognized approximately $4,700 of acquisition-related costs that were expensed in 2011. These costs are included in selling, general and administrative expenses in our Consolidated Statements of Operations and Comprehensive Income.

Barcrest service and sales revenue for the period September 23, 2011 (date of acquisition) through December 31, 2011 was approximately $6,900 and $7,400, respectively. Barcrest net loss was approximately $500 for the same period.

As required by ASC 805, Business Combinations, set forth below is our unaudited pro forma revenue and net loss for the years ended December 31, 2010 and 2011, as if the acquisition of Barcrest had occurred on January 1, 2010.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

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(in thousands, except per share amounts)

(3) Acquisitions and Dispositions (Continued)



	Years Ended December 31,
	2011		2010
Revenue from Consolidated Statements of Operations and Comprehensive Income	$	878,722	$	882,499
Add: Barcrest revenue not reflected in Consolidated Statements of Operations and Comprehensive Income plus pro forma adjustments (1)	43,210		53,447
Unaudited pro forma revenue	$	921,932	$	935,946

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(1)	Pro forma adjustment made to eliminate intercompany revenue and costs of approximately $3,200 and $500 for the years ended December 31, 2011 and 2010, respectively.



	Years Ended December 31,
	2011			2010
Net (loss) from Consolidated Statements of Operations and Comprehensive Income	$	(12,570	)	$	(149,201	)
Add: Barcrest net income not reflected in Consolidated Statements of Operations and Comprehensive Income plus pro forma adjustments (1) (2)	2,518			6,641
Unaudited pro forma net loss	$	(10,052	)	$	(142,560	)

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(1)	Pro forma adjustment made to capitalize development costs in accordance with the Company's accounting policies, including approximately $1,700 for each of the years ended December 31, 2011 and 2010.


(2)	Pro forma adjustment made to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2010, including approximately $2,300 and $2,200 for the years ended December 31, 2011 and 2010, respectively.

On August 5, 2010, we acquired substantially all of the assets of GameLogic Inc., a provider of interactive marketing services for the U.S. regulated gaming market, including GameLogic's software for internet-based loyalty programs as well as an extensive suite of interactive games and related intellectual property. We have integrated the GameLogic assets with our existing Properties Plus business. The acquisition was not material to our operations.

On April 19, 2010, we acquired certain assets of Sceptre Leisure Solutions Limited, including 751 server-based gaming terminals and associated customer contracts, to increase our estate of gaming machines supplied to and operated by licensed betting offices in the U.K. The operating results derived from the acquired assets have been included in the Gaming segment and have been consolidated in our statement of operations since the date of acquisition. The acquisition was not material to our operations.

Dispositions

On October 5, 2010, we completed the sale of the Racing Business to Sportech. Upon the closing of the transaction, we received approximately $33,000 in cash (subject to certain post-closing adjustments as specified in the purchase agreement) and 39,742 shares of Sportech stock (the "Consideration Shares") representing approximately 20% of Sportech's outstanding shares as of the closing of the transaction. The Consideration Shares were valued at approximately $26,300 based on the closing price of Sportech stock on October 4, 2010. Sportech also agreed to make an additional cash payment to us on September 30, 2013 of approximately $10,000 which is included in notes receivable in our Consolidated Balance Sheets as of December 31, 2012 and 2011. In addition, if the Racing Business, under Sportech's ownership, achieves certain performance

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(in thousands, except per share amounts)

(3) Acquisitions and Dispositions (Continued)

targets over the three-year period following the closing of the transaction, we will be entitled to an additional cash payment of up to $8,000.

Until completion of the sale on October 5, 2010, we classified the assets and liabilities of the Racing Business as held for sale in our Consolidated Balance Sheets. In accordance with U.S. GAAP, we were required to adjust the net assets classified as held for sale to fair value, less estimated cost to sell. During the nine month period ended September 30, 2010, we recorded a write-down of assets held for sale of $8,029 in our Consolidated Statements of Operations and Comprehensive Income to decrease the carrying amount of the Racing Business to fair value, less cost to sell. During the three months ended December 31, 2010, we recorded a loss on the sale of the Racing Business of $361.