Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

The following presents certain information on our intangible assets as of December 31, 2013 and 2012. Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives with no estimated residual values.



Intangible Assets	Gross Carrying Amount		Accumulated Amortization		Net Balance
Balance as of December 31, 2013
Amortizable intangible assets:
Patents	$	14.5	$	7.1	$	7.4
Customer lists	161.9		24.0		137.9
Licenses	181.0		59.9		121.1
Intellectual property	8.6		5.7		2.9
Brand name	39.3		0.6		38.7
Non-compete agreements	0.4		0.2		0.2
Lottery contracts	1.5		1.4		0.1
	407.2		98.9		308.3
Non-amortizable intangible assets:
Trade names	104.9		2.1		102.8
Total intangible assets	$	512.1	$	101.0	$	411.1
Balance as of December 31, 2012
Amortizable intangible assets:
Patents	$	13.7	$	6.1	$	7.6
Customer lists	41.5		25.4		16.1
Licenses	84.9		66.7		18.2
Intellectual property	24.3		20.1		4.2
Non-compete agreements	0.4		0.1		0.3
Lottery contracts	1.5		1.3		0.2
	166.3		119.7		46.6
Non-amortizable intangible assets:
Trade names	39.8		2.1		37.7
Total intangible assets	$	206.1	$	121.8	$	84.3

In 2013, the increase in intangible assets is related to recording the intangible assets of WMS of $325.0 million at fair value upon acquisition. The aggregate intangible asset amortization expense for the years ended December 31, 2013, 2012 and 2011 was $32.5 million, $17.6 million and $15.3 million, respectively. The estimated intangible asset amortization expense for the year ending December 31, 2014 and each of the subsequent four years is $59.8 million, $53.4 million, $44.4 million, $21.5 million and $16.9 million, respectively.

Goodwill

The table below reconciles the change in the carrying amount of goodwill, by reporting segment, for the period from December 31, 2011 to December 31, 2013.



Goodwill	Instant Products			Lottery Systems			Gaming		Totals
Balance as of December 31, 2011	$	334.1		$	186.6		$	247.7	$	768.4
Acquisitions	5.4			9.9			3.6		18.9
Foreign currency adjustments	1.3			1.4			11.4		14.1
Reallocation of Goodwill	(12.8		)	12.8			—		—
Balance as of December 31, 2012	328.0			210.7			262.7		801.4
Acquisitions and dispositions	—			—			385.6		385.6
Foreign currency adjustments	(2.4		)	2.7			5.0		5.3
Write off of goodwill (1)	(5.4		)	—			—		(5.4		)
Reallocation of goodwill	20.0			(39.7		)	19.7		—
Balance as of December 31, 2013	$	340.2		$	173.7		$	673.0	$	1,186.9

(1) At December 31, 2013, $5.4 million of goodwill was written off associated with the exit of our Provoloto instant lottery game operations in Mexico. See Note 3 (Acquisitions and Dispositions) for additional information.

Effective in the fourth quarter of 2013, we revised our operating segments to reflect the reorganization of our businesses following the acquisition of WMS and the financial information regularly reviewed by our chief executive officer, who is designated as the CODM under applicable accounting rules. As a result, we determined that we have four operating segments based on the financial information regularly reviewed by our CODM: instant products, lottery systems, gaming and interactive. Our interactive operating segment is aggregated in our Gaming reportable segment. For reportable segment information see Note 2 (Business and Geographic Segments).

We reviewed our operating segments in accordance with ASC 350, Intangibles - Goodwill and Other (“ASC 350”) to determine if additional reporting units exist within our operating segments based on the availability of discrete financial information that is regularly reviewed by segment management. We determined that we have six reporting units as of December 31, 2013: instant products; licensed properties; U.S. lottery systems; international lottery systems; gaming; and interactive. During 2012 and until the change in the fourth quarter of 2013 described above, we had seven operating segments and reporting units. The change to six reporting units required the reallocation of certain goodwill balances to our new reporting units based on a relative fair value approach in accordance with ASC 350. Prior to the change in the fourth quarter of 2013, our seven reporting units were: instant products; licensed properties; U.S. lottery systems; international lottery systems; China lottery; video systems; and gaming.

Our annual impairment valuation as of December 31, 2013 produced estimated fair values of equity, under our old and new structures, were in excess of the carrying value of equity for all of our reporting units. The estimated fair values of equity for each of our instant products, licensed properties, U.S. lottery systems, international lottery systems, and interactive reporting units were substantially in excess of the carrying value of such reporting units. As a result of the WMS acquisition, we recorded the fair value of all assets and liabilities acquired as of October 18, 2013 and corresponding goodwill. As such, although the estimated fair value of equity of our gaming reporting unit was in excess of its carrying value under our new structure in 2013, a decrease in the fair value of more than 9% for our Gaming reporting unit could potentially result in an impairment of goodwill.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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