XML 26 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Acquisitions, Investments, Dispositions and Divestitures
 6 Months Ended
Jun. 30, 2013
Business Combinations [Abstract]  
Acquisitions, Investments, Dispositions and Divestitures
Acquisitions, Investments, Dispositions and Divestitures
Acquisitions
Buffalo Studios, LLC and Bubbler Media
In December 2012, CIE purchased substantially all of the net assets of Buffalo Studios, LLC ("Buffalo"), a social and mobile games developer and owner of Bingo Blitz, for consideration of $45.2 million plus an earnout payment with an acquisition date fair value estimated at $5.6 million. During the first quarter 2013, the estimated fair value of the earnout was increased to $58.0 million, with a charge to acquisition and integration costs of $52.4 million. The estimated fair value of the earnout was reduced to $54.5 million during the second quarter 2013, resulting in a $3.5 million reduction in the earnout accrual, recorded in acquisition and integration costs.
In September 2012, CIE purchased the assets of Bubbler Media ("Bubbler") a social and mobile games developer based in Belarus, for consideration of approximately $7.5 million.
The purchase prices of Buffalo and Bubbler were allocated based on estimated fair values of the assets acquired and liabilities assumed, with the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. The preliminary purchase price allocations include total assets, liabilities and net assets acquired of Buffalo of $52.9 million, $7.7 million and $45.2 million, respectively. The preliminary purchase price allocations include net assets acquired of Bubbler of $7.5 million. The Company has not yet finalized its purchase price allocations for either of these transactions and is in the process of performing final reviews of the values assigned to assets acquired and liabilities assumed for both transactions.
Dispositions
Conrad Punta Del Este Resort and Casino
In November 2012, we signed a definitive agreement with Enjoy S.A. (“Enjoy”) to form a strategic relationship in Latin America and completed the transaction in May 2013. Under the terms of the agreement, Enjoy acquired 45% of Baluma S.A., our subsidiary that owns and operates the Conrad Punta Del Este Resort and Casino in Uruguay (the “Conrad”), in exchange for total consideration of $139.5 million. After customary deductions for expenses associated with the closing, we received $50.4 million in cash, net of $29.7 million of cash deconsolidated, a 4.5% equity stake in Enjoy, and a deferred cash payment of $31.9 million due by January 2014, which is included in other current assets as of June 30, 2013. The shares of Enjoy that we acquired are classified as available-for-sale securities. These securities are adjusted to their market value at every reporting period, with unrealized gains or losses recorded as a component of other comprehensive income.
In connection with the transaction, Enjoy assumed control of the Baluma S.A. board and primary responsibility for management of the Conrad. Upon completion of the transaction, we deconsolidated Baluma S.A. from our financial statements and began accounting for Baluma S.A. as an investment in non-consolidated affiliates utilizing the equity method of accounting.
Alea Leeds
On March 4, 2013, we permanently closed our Alea Leeds casino in England. As a result of the closure, during the quarter ended March 31, 2013, we recorded charges of $5.7 million related to the write-down of tangible and intangible assets, net of currency translation adjustment, and $15.8 million related to exit costs, comprised of non-cancellable contract costs of $15.1 million, employment related costs of $0.5 million and other costs in the amount of $0.2 million. During the quarter ended June 30, 2013, the Company paid $1.0 million of exit-related costs, accreted interest expense of $0.5 million and recognized $0.2 million increase in the liability due mainly to the impact of currency translation adjustments. As of June 30, 2013, $15.5 million remains accrued. We have presented the operations of Alea Leeds casino as discontinued operations in the Consolidated Condensed Statements of Operations for the quarter and six months ended June 30, 2013 and 2012. See “Discontinued Operations” below.
Harrah's St. Louis
On November 2, 2012, the Company sold its Harrah's St. Louis casino and recorded a pre-tax gain of $9.3 million on the sale. As a result of working capital adjustments in connection with such sale, the Company recorded reductions to the originally recorded pre-tax gain of $0.7 million in the first quarter of 2013. We have presented the results of Harrah's Maryland Heights, LLC, previous owner of the Harrah's St. Louis casino, as discontinued operations in our Consolidated Condensed Statements of Operations for the quarter and six months ended June 30, 2012. See “Discontinued Operations” below.
Macau Land Concession
During the second quarter of 2012, we determined that it was more likely than not that we would divest of our investment in a land concession in Macau prior to the end of the remaining 35-year term of the concession (the “Macau Land Concession”). As a result, we performed an impairment assessment on the Macau Land Concession and recorded an impairment charge of $101.0 million.
In the fourth quarter of 2012, the Company began discussions with interested investors regarding a sale of the subsidiaries that hold the Macau Land Concession. As a result of this plan of disposal, the assets and liabilities have been classified as held for sale in our Consolidated Condensed Balance Sheets at June 30, 2013 and December 31, 2012. See “Held for Sale” below.
We assess the fair value of the Macau Land Concession each reporting period and, as a result, recorded an adjustment to fair value that reduced book value by $21.0 million during the first quarter of 2013. There were no additional fair value adjustments recognized in the second quarter of 2013.
We have presented the operations of the business as discontinued operations in the Consolidated Condensed Statements of Operations for the quarters and six months ended June 30, 2013 and 2012. See “Discontinued Operations” below.
On August 6, 2013, the Company, along with certain of its wholly-owned subsidiaries, entered into a share purchase agreement with Pearl Dynasty Investments Limited (“Pearl Dynasty”), pursuant to which Pearl Dynasty will purchase from the Company all of the equity interests of the subsidiaries that hold the Macau Land Concession for a purchase price of $438.0 million subject to customary closing conditions. See Note 21, “Subsequent Events,” for further discussion.
Held for Sale
Assets and liabilities classified as held for sale relate to the subsidiaries that hold our land concessions in Macau and are as follows:
(In millions)
June 30, 2013
 
December 31, 2012
Assets
 
 
 
Cash and cash equivalents
$
4.8

 
$
4.7

Other current assets
0.6

 
0.4

     Assets held for sale, current
$
5.4

 
$
5.1

 
 
 
 
Property and equipment, net
$
441.1

 
$
471.2

     Assets held for sale, non-current
$
441.1

 
$
471.2

 
 
 
 
Liabilities
 
 
 
Accounts payable and accrued expenses
$
3.6

 
$
3.8

     Liabilities held for sale, current
$
3.6

 
$
3.8

 
 
 
 
Deferred credits and other
$
0.2

 
$
0.2

Deferred income taxes
49.4

 
51.9

     Liabilities held for sale, non-current
$
49.6

 
$
52.1


Discontinued Operations
Net revenues, pre-tax (loss)/income from operations, and (loss)/income, net of income taxes presented as discontinued operations are as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(In millions)
2013
 
2012
 
2013
 
2012
Net revenues
 
 
 
 
 
 
 
Harrah's St. Louis
$
—

 
$
64.9

 
$
—

 
$
128.5

Macau
0.8

 
0.7

 
1.8

 
1.6

Alea Leeds
—

 
1.2

 
0.7

 
2.7

           Total net revenues
$
0.8

 
$
66.8

 
$
2.5

 
$
132.8

 
 
 
 
 
 
 
 
Pre-tax income/(loss) from operations
 
 
 
 
 
 
 
Harrah's St. Louis
$
—

 
$
22.9

 
$
(0.7
)
 
$
41.9

Macau
0.2

 
(105.9
)
 
(20.5
)
 
(109.6
)
Alea Leeds
(0.5
)
 
(1.4
)
 
(23.0
)
 
(2.5
)
           Total pre-tax loss from discontinued
 operations
$
(0.3
)
 
$
(84.4
)
 
$
(44.2
)
 
$
(70.2
)
 
 
 
 
 
 
 
 
Income/(loss), net of income taxes
 
 
 
 
 
 
 
Harrah's St. Louis
$
—

 
$
14.1

 
$
(0.4
)
 
$
25.7

Macau
0.2

 
(93.2
)
 
(18.0
)
 
(96.4
)
Alea Leeds
(0.5
)
 
(1.4
)
 
(23.0
)
 
(2.5
)
           Total loss from discontinued operations, net of
 income taxes
$
(0.3
)
 
$
(80.5
)
 
$
(41.4
)
 
$
(73.2
)