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Description of the Business and Summary of Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Description of the Business and Summary of Significant Accounting Policies | Description of the Business and Summary of Significant Accounting Policies Description of the Business We are a leading developer of technology‑based products and services and associated content for the worldwide gaming, lottery and interactive gaming industries. Our portfolio includes gaming machines and game content, casino management systems, table game products and services, instant and draw‑based lottery games, lottery systems, lottery content and services, interactive gaming and social casino solutions, as well as other products and services. We report our operations in three business segments—Gaming, Lottery and Interactive. Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The accompanying condensed consolidated financial statements include the accounts of SGC and its wholly owned subsidiaries, as well as those subsidiaries in which we have a controlling financial interest. Investments in other entities in which we do not have a controlling financial interest but we exert significant influence are accounted for in our condensed consolidated financial statements using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, we have made all adjustments necessary to present fairly our consolidated financial position, results of operations and comprehensive loss and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2016 10-K. Interim results of operations are not necessarily indicative of results of operations for a full year. Significant Accounting Policies There have been no changes to our significant accounting policies described within the Notes of our 2016 10-K. Acquisitions During the third quarter of 2016, we entered into a definitive agreement to acquire all of the issued and outstanding common shares of DEQ Systems Corp. (DEQ) for $22.0 million in cash consideration transferred. The transaction closed on January 18, 2017. Substantially all of the purchase price was allocated to acquired intellectual property. Refer to Subsequent Events Note 15. Revenue The following table summarizes our revenues by type within each of our business segments:
| Three Months Ended March 31,
| 2017 |  | 2016
Gaming |  |  |
Gaming operations | $ | 172.4 |  |  | $ | 184.4 |
Gaming machine sales | 156.2 |  |  | 134.5 |
Gaming systems | 61.5 |  |  | 59.7 |
Table products | 49.9 |  |  | 43.1 |
Total | $ | 440.0 |  |  | $ | 421.7 |
Lottery |  |  |
Instant products | $ | 141.7 |  |  | $ | 137.3 |
Lottery systems | 47.4 |  |  | 50.4 |
Total | $ | 189.1 |  |  | $ | 187.7 |
Interactive |  |  |
Social Gaming - B2C | $ | 80.2 |  |  | $ | 60.2 |
Other | 16.1 |  |  | 12.4 |
Total | $ | 96.3 |  |  | $ | 72.6 |
Deferred Revenue The following table summarizes the deferred revenue activity for the reporting period:
| Three Months Ended March 31,
| 2017 |  | 2016
Deferred revenue balance, beginning of period | $ | 67.4 |  |  | $ | 57.8 |
New deferrals | 45.8 |  |  | 92.9 |
Amounts recognized in revenue | (51.8 | ) |  | (85.5 | )
Deferred revenue balance, end of period | $ | 61.4 |  |  | $ | 65.2 |
Computation of Basic and Diluted Net Loss Per Share Basic and diluted net loss per share were the same for all periods presented as all common stock equivalents would be anti-dilutive. We excluded 3.0 million and 1.8 million of stock options from the diluted weighted-average common shares outstanding for the three-month periods ended March 31, 2017 and 2016, respectively, and 5.0 million and 4.6 million of RSUs from the calculation of diluted weighted-average common shares outstanding for the three-month periods ended March 31, 2017 and 2016, respectively. New Accounting Guidance - Recently Adopted In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amended guidance is intended to simplify several aspects of accounting for share-based payment award transactions, including income tax consequences, accounting for forfeitures, classification of awards as either equity or liabilities and classification in the statement of cash flows. ASU 2016-09 has separate transition guidance for each element of the new standard. We adopted the guidance at the beginning of first quarter 2017. The adoption of this guidance did not result in a net cumulative-effect adjustment to accumulated loss, as the previously unrecognized excess tax benefit of $10.1 million was fully offset by an increase in the valuation allowance as of December 31, 2016. The excess tax benefit recognized in our provision for income taxes for the three months ended March 31, 2017 was immaterial. In addition, we elected to continue to account for forfeitures by estimating the expected forfeitures over the course of a vesting period. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted the guidance retrospectively at the beginning of first quarter 2017. The adoption of this guidance resulted in increases to the cash, cash equivalents and restricted cash beginning-of-period and end-of period line item totaling $38.1 million and $38.7 million, respectively, which now includes restricted cash, and a $0.6 million decrease in net cash used in investing activities for the three months ended March 31, 2016. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new amendments, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. We adopted this guidance prospectively at the beginning of first quarter 2017, which will simplify our future goodwill impairment testing. New Accounting Guidance - Not Yet Adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 combined with all subsequent amendments (collectively ASC 606) provides guidance outlining a single comprehensive revenue model in accounting for revenue from contracts with customers. ASC 606 supersedes existing revenue recognition guidance, including industry-specific guidance, and replaces it with a five-step revenue model with a core principle that "an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. We will adopt this guidance at the beginning of the first quarter of 2018, using a modified retrospective application approach. Refer to Note 1 of our 2016 10-K for our current assessment of the anticipated impact of adopting this guidance on revenue recognition for each of our business segments. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amended guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of our operating leases, where we are the lessee, to be recognized on our Consolidated Balance Sheet. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier adoption permitted. We are currently evaluating the impact and timing of adopting this guidance. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The new guidance will be effective for us beginning January 1, 2020, with early adoption permitted beginning January 1, 2018. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are currently evaluating the impact and timing of adopting this guidance. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance clarifies the definition of a business in order to allow for the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adopting this guidance. We do not expect that any other recently issued accounting guidance will have a significant effect on our financial statements.

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