Reportable Segment Information

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Reportable Business Segment Information

Reportable Business Segment Information

We report our operations in three business segments—Instant Products, Lottery Systems and Gaming—representing our different products and services. These are our reportable segments under ASC 280, Segment Reporting. The Instant Products and Lottery Systems business segments are managed by one executive and the Gaming business segment is managed by a different executive, both of whom report to our chief executive officer (who is our "chief operating decision maker" under applicable accounting standards). Our three business segments represent the aggregation of similar operating segments. Our Instant Products business segment is comprised of our instant products operating segment, which provides instant lottery games and related value-added services, as well as licensed brands that are printed on instant lottery games and other promotional lottery products.  Our Lottery Systems business segment is comprised of our lottery systems operating segment, which provides products and services to lottery operators generally comprised of a central system, customized computer software, data communication services, support and/or related equipment.  Our Gaming business segment includes (1) our gaming operating segment, which generally sells new and used gaming machines, conversion kits and parts, and leases or otherwise provides gaming machines, systems and content, to commercial, tribal and governmental gaming operators, and (2) our interactive operating segment, which provides social gaming entertainment and game server services for real-money gaming. Additional discussion regarding the products and services from which each reportable business segment derives its revenue is included in Note 1 (Description of the Business and Summary of Significant Accounting Policies) in our 2013 Annual Report on Form 10-K.

Effective in the fourth quarter of 2013, we revised our business and operating segments to reflect the reorganization of our business following the WMS acquisition and the resulting changes in the financial information regularly reviewed by our chief executive officer. Based on that review, we moved our video systems operating segment from the Lottery Systems business segment to the Gaming business segment. This change, which was effective as of December 31, 2013, had no impact on the Company's consolidated financial statements for any periods. Business segment information for the three and nine months ended September 30, 2013 has been adjusted to reflect this change.

The following tables present revenue, cost of revenue, SG&A, R&D, employee termination and restructuring, D&A, operating (loss) income from continuing operations and earnings (loss) from equity investments by business segment for the three and nine months ended September 30, 2014 and 2013. Certain unallocated expenses managed at the corporate level, comprised primarily of general and administrative costs and other income (expense), net, are not allocated to our business segments. Segment results for 2013 below do not include the results of WMS, which we acquired in October 2013. The increase in unallocated corporate costs for the three and nine months ended September 30, 2014 primarily related to the inclusion of WMS results.

	Three Months Ended September 30, 2014
	Instant Products			Lottery Systems		Gaming			Total
Revenue:
Instant games	$	130.8		$	—	$	—		$	130.8
Services	—			48.2		134.6			182.8
Product sales	3.2			30.5		68.3			102.0
Total revenue	134.0			78.7		202.9			415.6
Cost of instant games (1)	69.7			—		—			69.7
Cost of services (1)	—			30.4		39.2			69.6
Cost of product sales (1)	2.4			24.6		32.9			59.9
Selling, general and administrative	12.2			5.6		42.4			60.2
Research and development	0.5			0.9		24.9			26.3
Employee termination and restructuring	0.4			—		1.5			1.9
Depreciation and amortization	8.9			16.0		69.8			94.7
Segment operating income (loss) from continuing operations	$	39.9		$	1.2	$	(7.8	)	$	33.3
Unallocated corporate costs									41.1
Consolidated operating loss from continuing operations									$	(7.8	)
Earnings (loss) from equity investments	$	(15.4	)	$	0.1	$	1.3		$	(14.0	)

(1) Exclusive of depreciation and amortization.

	Three Months Ended September 30, 2013
	Instant Products		Lottery Systems		Gaming			Total
Revenue:
Instant games	$	129.7	$	—	$	—		$	129.7
Services	—		48.6		32.1			80.7
Product sales	3.1		13.6		7.3			24.0
Total revenue	132.8		62.2		39.4			234.4
Cost of instant games (1)	70.6		—		—			70.6
Cost of services (1)	—		27.1		15.5			42.6
Cost of product sales (1)	2.2		7.3		3.8			13.3
Selling, general and administrative	11.5		5.3		6.3			23.1
Research and development	0.1		0.9		0.4			1.4
Depreciation and amortization	9.2		13.4		12.4			35.0
Segment operating income from continuing operations	$	39.2	$	8.2	$	1.0		$	48.4
Unallocated corporate costs								22.7
Consolidated operating income from continuing operations								$	25.7
Earnings (loss) from equity investments	$	5.2	$	0.1	$	(1.9	)	$	3.4

(1) Exclusive of depreciation and amortization.

	Nine Months Ended September 30, 2014
	Instant Products			Lottery Systems		Gaming			Total
Revenue:
Instant games	$	392.4		$	—	$	—		$	392.4
Services	—			149.3		389.6			538.9
Product sales	9.4			63.3		216.6			289.3
Total revenue	401.8			212.6		606.2			1,220.6
Cost of instant games (1)	212.5			—		—			212.5
Cost of services (1)	—			90.4		110.3			200.7
Cost of product sales (1)	6.5			50.8		103.9			161.2
Selling, general and administrative	38.9			17.1		132.9			188.9
Research and development	1.0			1.7		74.3			77.0
Employee termination and restructuring	1.6			—		8.9			10.5
Depreciation and amortization	26.2			44.6		200.2			271.0
Segment operating income (loss) from continuing operations	$	115.1		$	8.0	$	(24.3	)	$	98.8
Unallocated corporate costs									115.1
Consolidated operating loss from continuing operations									$	(16.3	)
Earnings (loss) from equity investments	$	(12.4	)	$	1.3	$	3.3		$	(7.8	)

(1) Exclusive of depreciation and amortization.

	Nine Months Ended September 30, 2013
	Instant Products		Lottery Systems		Gaming			Total
Revenue:
Instant games	$	379.0	$	—	$	—		$	379.0
Services	—		146.1		101.6			247.7
Product sales	10.1		35.2		17.0			62.3
Total revenue	389.1		181.3		118.6			689.0
Cost of instant games (1)	210.3		—		—			210.3
Cost of services (1)	—		82.0		53.0			135.0
Cost of product sales (1)	7.2		22.4		9.7			39.3
Selling, general and administrative	35.5		16.0		19.3			70.8
Research and development	0.4		3.1		1.2			4.7
Employee termination and restructuring	0.3		—		—			0.3
Depreciation and amortization	27.0		38.8		44.8			110.6
Segment operating income (loss) from continuing operations	$	108.4	$	19.0	$	(9.4	)	$	118.0
Unallocated corporate costs								68.8
Consolidated operating income from continuing operations								$	49.2
Earnings (loss) from equity investments	$	15.8	$	0.7	$	(3.5	)	$	13.0

(1) Exclusive of depreciation and amortization.

The following table presents a reconciliation of business segment operating income from continuing operations to net (loss) income from continuing operations before income taxes for each period:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Reportable business segment operating income from continuing operations	$	33.3		$	48.4		$	98.8		$	118.0
Unallocated corporate costs	(41.1		)	(22.7		)	(115.1		)	(68.8		)
Consolidated operating (loss) income from continuing operations	(7.8		)	25.7			(16.3		)	49.2
Interest expense	(45.7		)	(25.2		)	(142.9		)	(75.3		)
Earnings (loss) from equity investments	(14.0		)	3.4			(7.8		)	13.0
Loss on early extinguishment of debt	—			—			(25.9		)	—
Gain on sale of equity interest	—			—			14.5			—
Other income (expense), net	3.1			—			9.2			(0.8		)
Net (loss) income from continuing operations before income taxes	$	(64.4	)	$	3.9		$	(169.2	)	$	(13.9	)

In evaluating segment financial performance, we focus on operating income as a segment’s measure of profit or loss. Segment operating income is income before other income (expense), net, interest expense, earnings (loss) from equity investments, loss on early extinguishment of debt, gain on sale of equity interest, unallocated corporate costs and income taxes. The accounting policies of the business segments are the same as those described in our summary of significant accounting policies in Note 1 (Description of the Business and Summary of Significant Accounting Policies) in this Quarterly Report on Form 10-Q and Note 1 (Description of the Business and Summary of Significant Accounting Policies) in our 2013 Annual Report on Form 10-K.