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Description of the Business and Summary of Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2021
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, social and digital gaming industries. Our portfolio of revenue-generating activities primarily includes supplying gaming machines and game content, casino-management systems and table game products and services to licensed gaming entities; providing instant and draw-based lottery products, lottery systems and lottery content and services to lottery operators; providing social casino and other mobile games to retail customers; and providing a comprehensive suite of digital RMG and sports wagering solutions, distribution platforms, content, products and services. We also gain access to technologies and pursue global expansion through strategic acquisitions and equity investments. We report our results of operations in four business segments—Gaming, Lottery, SciPlay and Digital—representing our different products and services. 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, its wholly owned subsidiaries, and 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 consolidated financial statements using the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of SGC and its management, we have made all adjustments necessary to present fairly our consolidated financial position, results of operations, 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 2020 10-K. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year. Strategic Review Update On June 29, 2021, we announced that the Company, with the support of its Board of Directors, completed the strategic review and intends to divest our Lottery and Sports Betting (component of our Digital business segment) operations creating a path to significantly de-lever and position the Company for enhanced growth. We are currently evaluating strategic alternatives to execute the divestitures for each business, respectively, including an initial public offering (“IPO”) or a combination with a special purpose acquisition company (“SPAC”), or a sale or a strategic combination with another business. On July 15, 2021, we submitted a proposal to SciPlay’s board of directors to acquire all the outstanding equity interest in SciPlay not already owned by us (approximately 19%) in alignment with the strategy developed as part of the strategic review described above. Our offer to all SciPlay shareholders (other than SGMS and our subsidiaries) is that they will receive 0.250 shares of our common stock for each share of SciPlay Class A common stock they own. The transaction is subject to the negotiation and execution of a mutually acceptable merger agreement. There can be no assurances that our evaluation of strategic alternatives for our Lottery and Sports Betting businesses or for the acquisition of the remaining equity interest in SciPlay will result in any transactions or other actions and execution of these transactions is subject to significant market, operational and other uncertainties. As such, the Lottery and Sports Betting portions of the Company do not meet held-for sale criteria set forth under ASC 360 and ASC 205 as of June 30, 2021. Impact of COVID-19 As more fully described in the “Description of the Business and Summary of Significant Accounting Policies - Impact of COVID-19” in Note 1 of our 2020 10-K, COVID-19 disruptions continue to impact our results of operations and particularly our Gaming business segment operations. Although most gaming establishments have reopened globally and while some have begun operating at full capacity, many gaming operations have yet to return to pre-COVID levels. The current state reflects continued fluctuations in infection rates and regulations for various regions along with ongoing domestic and international travel restrictions or warnings, social distancing measures, reduced operating capacity and an overall economic and general uncertainty regarding the magnitude and length of time that these disruptions will continue. These circumstances may change in the future and such changes could be material. We continue to assess the situation jurisdiction by jurisdiction, actively managing our cash flows and continuing to evaluate additional measures that may reduce operating costs and conserve cash to preserve liquidity as we execute on our strategic initiatives. As of June 30, 2021, our total available liquidity (excluding our SciPlay business segment) was $984 million, which included $353 million of undrawn availability under SGI’s revolving credit facility. In July 2021, we made a voluntary payment of $150 million on SGI’s revolving credit facility. Significant Accounting Policies There have been no changes to our significant accounting policies described within the Notes of our 2020 10-K. Computation of Basic and Diluted Net Income (Loss) Per Share Basic and diluted net income per share for the three and six months ended June 30, 2021 were computed by dividing net income attributable to SGC by the weighted average number of shares outstanding, and the weighted average number of shares outstanding adjusted to give effect to all potentially dilutive securities using the treasury stock method, respectively. Basic and diluted net loss per share were the same for the three and six months ended June 30, 2020 as all common stock equivalents during those periods would be anti-dilutive. We excluded 1 million and 4 million of stock options and RSUs from the diluted weighted-average common shares outstanding for the three and six months ended June 30, 2020, respectively. SportCast Acquisition In August of 2020, we obtained a one-year option agreement to acquire SportCast Pty, Limited (the “SportCast Option”), a privately held sports betting content and player engagement technology and platform supplier. We accounted for the SportCast Option by electing a measurement alternative to measure this equity investment at cost, less impairment given lack of readily determinable fair value in accordance with ASC Topic 321. In May 2021, we exercised the SportCast Option and completed an acquisition of SportCast (the “SportCast Acquisition”), which expanded our portfolio of sports betting technology, services and content of our Digital business segment. We accounted for this acquisition using the acquisition method of accounting allocating the total consideration transferred to acquired tangible and intangible assets and assumed liabilities based on estimated fair values. The fair value determination of the SportCast Option, the acquired assets and assumed liabilities requires significant judgments and estimates. The estimated fair values of the SportCast Option, acquired assets, assumed liabilities and resulting goodwill are subject to adjustment as we finalize our purchase price accounting. The total consideration transferred was $81 million primarily consisting of $7 million in cash and $63 million in fair value of the SportCast Option. This resulted in a $63 million gain recorded in the Other income (expense), net line item in our consolidated statements of operations for the three and six-months ended June 30, 2021 due to the increase in fair value of the SportCast Option. The fair value of the Sportscast Option has been preliminarily determined using an income approach method and level 3 inputs in the hierarchy as established by ASC 820. The discount rate used in the valuation analysis was 15%. The preliminary allocation of the purchase price (expected to be finalized by the end of 2021) resulted in $26 million allocated to intangible assets primarily consisting of technology and customer relationship and $61 million allocated to goodwill. The factors contributing to the recognition of acquisition goodwill are based on customer offering diversification, expected synergies, assembled workforce and other strategic benefits. None of the resultant goodwill is expected to be deductible for income tax purposes. Subsequent Period Acquisitions On July 2, 2021, SciPlay acquired privately held Koukoi Oy (“Koukoi”), a developer and operator of casual mobile games for approximately $5 million in cash consideration. The acquisition allows SciPlay to expand its casual games portfolio. In August of 2021, we acquired privately held Lightning Box Games (Lightning Box), iGaming content studio for approximately $40 million in cash consideration and up to an additional $30 million in contingent consideration. The acquisition allows our Digital business segment to expand our iGaming content portfolio. We are in the process of completing the preliminary purchase price accounting for these acquisitions and expect that a substantial portion of the purchase price will be allocated to acquired intellectual property, customer relationship and goodwill. The revenue and earnings associated with all of the above acquisitions are not significant to our consolidated financial statements. New Accounting Guidance - Not Yet Adopted The FASB issued ASU No. 2020-04 and subsequently ASU No. 2021-01, Reference Rate Reform (Topic 848) in March 2020 and January 2021, respectively. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, including derivative instruments impacted by changes in the interest rates used for discounting cash flows for computing variable margin settlements, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued, in 2022 or potentially 2023 (pending possible extension). The ASUs establish certain contract modification principles that entities can apply in other areas that may be affected by reference rate reform and certain elective hedge accounting expedients and exceptions. The ASUs may be applied prospectively. Based on our preliminary assessment completed to date, we do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements. We do not expect that any other recently issued accounting guidance will have a significant effect on our consolidated financial statements.

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- Definition The entire disclosure for the business description and accounting policies concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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