Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2012

Note 4—Goodwill and Other Intangible Assets

The following table sets forth changes in our goodwill and other intangible assets for the nine months ended September 30, 2012.


	Amortizing			Non-Amortizing Intangible Assets
(In millions)	Intangible Assets			Goodwill			Other
Balance at December 31, 2011	$	1,163.7		$	3,360.4		$	3,199.5
Impairments		—			(247.0	)		(192.0	)
Additions		—			7.5			—
Amortization expense		(129.6	)		—			—
Contribution of Thistledown to joint venture		—			(20.1	)		—
Foreign currency translation		0.3			—			0.8

Balance at September 30, 2012	$	1,034.4		$	3,100.8		$	3,008.3

Each year, we perform a preliminary annual impairment assessment of goodwill and other non-amortizing intangible assets as of September 30. In the fourth quarter of each year, we update our preliminary assessment, once we finalize our long-term operating plan for the next fiscal year and various other assumptions. We perform assessments for impairment of goodwill and other intangible assets more frequently if impairment indicators exist.

In the second quarter of 2012, due to weak economic conditions in certain gaming markets in which we operate, we performed an interim assessment of goodwill and other non-amortizing intangible assets for impairment. This analysis resulted in an impairment charge of $33.0 million related to trademark intangibles. We have completed our preliminary annual assessment of goodwill and other non-amortizing intangible assets as of September 30, 2012, which resulted in impairment charges of $406.0 million, which is comprised of $247.0 million related to goodwill, $127.0 million related to trademarks, and $32.0 million related to gaming rights. These impairment charges are a result of the combination of an increase in our discount rate, and reduced projected revenues associated with these intangible assets within our long-term operating plan as a result of the current economic climate.

We are not able to finalize our annual impairment assessment until such time as we finalize the Company’s 2013 operating plan and certain other assumptions, which we expect to complete during fourth quarter 2012. Changes to the preliminary 2013 operating plan or other assumptions could require us to update our annual impairment assessment, which could result in either a reduction to the charge recorded during the quarter ended September 30, 2012 or in an additional impairment charge.

For our preliminary assessment, we determined the estimated fair value of each reporting unit as a function, or multiple, of earnings before interest, taxes, depreciation and amortization (“EBITDA”), combined with estimated future cash flows discounted at rates commensurate with the Company’s capital structure and cost of capital, giving appropriate consideration to the prevailing borrowing rates within the casino industry in general. We also evaluated the aggregate fair value of all of our reporting units and other non-operating assets in comparison to our actual market capitalization at September 30, 2012 in connection with the determination of an appropriate discount rate. Both EBITDA multiples and discounted cash flows are common measures used to value and buy or sell cash-intensive businesses such as casinos. We determine the estimated fair values of our non-amortizing intangible assets by primarily using the Relief From Royalty Method and Excess Earnings Method under the income approach.

The annual evaluation of goodwill and other non-amortizing intangible assets requires the use of estimates about future operating results, valuation multiples, and discount rates to determine their estimated fair value. Changes in these assumptions can materially affect these estimates. Thus, to the extent the economy deteriorates further in the near future, discount rates increase significantly, or we do not meet our projected performance, we could have additional impairments to record in the next twelve months within our financial statements, and such impairments could be material. This is especially true for any of our properties where goodwill and other non-amortizing intangible assets have been partially impaired due to a recent impairment analysis, and for our Las Vegas properties, which have a significant portion of our total remaining goodwill balance.

As discussed in Note 2, “Acquisitions, Investments and Dispositions,” we contributed our interests in Thistledown to ROC which included $20.1 million of goodwill.

The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets other than goodwill:


	September 30, 2012									December 31, 2011
(Dollars in millions)	Weighted Average Remaining Useful Life (in years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortizing intangible assets
Customer relationships		7.3	$	1,456.7	$	(586.8	)	$	869.9	$	1,456.7	$	(492.4	)	$	964.3
Contract rights		2.2		145.1		(62.9	)		82.2		144.4		(52.3	)		92.1
Patented technology		3.6		118.9		(67.7	)		51.2		118.9		(45.9	)		73.0
Gaming rights		11.8		42.8		(12.2	)		30.6		42.8		(10.2	)		32.6
Trademarks		0.3		7.8		(7.3	)		0.5		7.8		(6.1	)		1.7

			$	1,771.3	$	(736.9	)		1,034.4	$	1,770.6	$	(606.9	)		1,163.7

Non-amortizing intangible assets
Trademarks									1,748.9							1,908.7
Gaming rights									1,259.4							1,290.8

									3,008.3							3,199.5

Total intangible assets other than goodwill								$	4,042.7						$	4,363.2

- 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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