Acquisitions and Dispositions

Acquisitions

On October 18, 2013 we acquired WMS, a global gaming supplier with a diversified suite of products and strong content creation capabilities, for $1,485.9 million.

We have recorded the assets and liabilities of WMS based on our preliminary estimates of their fair values as of the acquisition date. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of assets) requires significant judgment. The estimates and assumptions include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in future cash flows. The estimated fair values of the assets and liabilities of WMS and resulting goodwill are subject to adjustment as the Company finalizes its fair value analysis. The significant items for which a final fair value has not been determined as of the filing of this Quarterly Report on Form 10-Q include accrued liabilities, deferred income taxes and other long-term liabilities. We expect to complete our fair value determinations by the end of the third quarter of 2014. We do not expect our fair value determinations to change; however, there may be differences compared to the amounts reflected in our consolidated financial statements at March 31, 2014 as we finalize our analysis.

Based on our preliminary estimates, the equity purchase price exceeded the aggregate estimated fair value of the acquired assets and assumed liabilities at the acquisition date by $385.6 million, which amount has been recognized as goodwill within our Gaming segment. We attribute this goodwill to enhanced financial and operational scale, market diversification, opportunities for synergies and other strategic benefits. None of the goodwill associated with the acquisition is deductible for income tax purposes and, as such, no deferred taxes have been recorded related to goodwill.

The preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed did not change during the three months ended March 31, 2014 from the amounts disclosed in Note 3 in our 2013 Annual Report on Form 10-K, and is presented below:



	At October 18, 2013
Current assets	$	508.0
Long-term notes receivable	76.2
Property, plant and equipment, net	465.3
Goodwill	385.6
Intangible assets	325.0
Intellectual property	201.2
Other long-term assets	5.9
Total assets	1,967.2
Current liabilities	(164.4		)
Deferred income taxes	(166.6		)
Long-term liabilities	(150.3		)
Total liabilities	(481.3		)
Total equity purchase price	$	1,485.9

As required by ASC 805, Business Combinations, the following unaudited pro forma financial information for the three months ended March 31, 2013 gives effect to the WMS acquisition as if it had been completed on January 1, 2012. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the operating results actually would have been had the WMS acquisition been completed on January 1, 2012. In addition, the unaudited pro forma financial information does not purport to project the future operating results of the Company. This information is preliminary in nature and subject to change based on any final purchase price allocation adjustments. The unaudited pro forma financial information does not reflect (1) any anticipated synergies (or costs to achieve anticipated synergies) or (2) the impact of non-recurring items directly related to the WMS acquisition.



	Three Months Ended
	March 31, 2013
Revenue from Consolidated Statements of Operations and Comprehensive Loss	$	219.6
Add: WMS revenue not reflected in Consolidated Statements of Operations and Comprehensive Loss	177.9
Unaudited pro forma revenue	$	397.5



	Three Months Ended
	March 31, 2013
Net loss from continuing operations from Consolidated Statements of Operations and Comprehensive Loss	$	(12.3	)
Add: WMS net loss from continuing operations not reflected in Consolidated Statements of Operations and Comprehensive Loss plus pro forma adjustments (1), (2), (3) and (4) below	(12.4		)
Unaudited pro forma net loss from continuing operations	$	(24.7	)

Unaudited pro forma amounts reflect the following adjustments:

(1) An adjustment to reflect additional D&A of $10.6 million for the three months ended March 31, 2013 that would have been incurred assuming the fair value adjustments to intangible assets and property and equipment had been applied on January 1, 2012.

(2) An adjustment to reverse acquisition-related fees and expenses of $11.1 million for the three months ended March 31, 2013.

(3) An adjustment to reflect additional interest expense of $20.3 million for the three months ended March 31, 2013 that would have been incurred assuming our new credit facilities were in place as of January 1, 2012.

(4) An adjustment of $0.1 million for the three months ended March 31, 2013 to reverse the U.S. tax expense of WMS under the assumption that the U.S. taxable income of WMS would have been offset by U.S. tax attributes of the Company.

Dispositions

On March 25, 2013, we completed the sale of our installed base of gaming terminals in our pub business for £0.5 million. There were no results of operations for this business for the three months ended March 31, 2014. The components of our loss from discontinued operations for the three months ended March 31, 2013 are presented below:



	Three Months Ended
	March 31, 2013
Revenue:
Services	$	1.8

Operating expenses:
Cost of services (1)	2.6
Selling, general and administrative	0.6
Employee termination and restructuring	—
Depreciation and amortization	0.5

Loss from discontinued operations	(1.9		)

Other expense	(0.1		)
Gain on sale of assets	0.8
Income tax benefits	0.3

Net loss from discontinued operations	$	(0.9	)

(1) Exclusive of depreciation and amortization.