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Acquisitions And New Ventures | 12 Months Ended
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Dec. 31, 2014
Acquisitions and New Ventures [Abstract] |
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | ACQUISITIONS AND NEW VENTURES Big Fish Games On December 16, 2014, the Company completed the acquisition of Big Fish Games. Big Fish Games, which has locations in Seattle, Washington, Oakland, California and in Luxembourg employs approximately 580 employees and develops casual games for PCs and mobile devices worldwide. Big Fish Games operates in three business lines: premium paid, casino and casual free-to-play. The Company acquired Big Fish Games to leverage its casino and casual game experience, assembled workforce and to position itself in the mobile and online game industry. The Company financed the acquisition with borrowings under its Amended and Restated Credit Agreement (the “Senior Secured Credit Facility”) and the addition of a $200 million Term Loan Facility (“Term Loan”) to the existing Senior Secured Credit Facility. The purchase price consideration was $838.3 million, composed of $401.7 million in cash, a deferred payment to the founder of Big Fish Games of $85.3 million, payable over three years and recorded at fair value of $78.0 million as of the acquisition date, an estimated payable to the Big Fish Games equity holders related to an income tax refund of $18.1 million and $15.8 million payable in 157,115 shares of the common stock of the Company. In addition, the Company may be required to pay additional variable cash consideration that is contingent upon the achievement of certain performance milestones of Big Fish Games through December 31, 2015 and is limited to a maximum of $350 million based on achievement of certain non-GAAP earnings targets before interest and tax. The estimated fair value of the earnout liability at the acquisition date was $324.7 million. The Company estimated the fair value of the deferred payment and the earnout liability using a discounted cash flows analysis over the period in which the obligation is expected to be settled, and applied a discount rate based on the Company’s cost of debt. The cost of debt as of the closing date was based on the observed market yields of the Company’s Senior Unsecured Notes issued in December of 2013 and was adjusted for the difference in seniority and term of the deferred payment and the earnout liability. See Note 16 for further discussion of the fair value measurement of the deferred payment and the earnout liability. The fair values recorded were based upon a preliminary valuation. Estimates and assumptions used in such valuation are subject to change, which could be significant, within the measurement period up to one year from the acquisition date. The primary areas of the preliminary valuation that are not yet finalized relate to the fair value of amounts for income taxes, adjustments to working capital, and the final amount of residual goodwill. The Company expects to continue to obtain information to assist it in determining the fair values of the net assets acquired at the acquisition date during the measurement period. The following table summarizes (in thousands) the preliminary fair value of the assets acquired and liabilities assumed, net of cash acquired of $34.7 million, at the date of acquisition.
| Total
Accounts receivable | $ | 19,274 |
Income taxes receivable | 18,087 |
Prepaid expenses | 9,727 |
Deferred income taxes | 905 |
Other assets | 1,780 |
Property and equipment | 14,632 |
Goodwill | 538,904 |
Other intangible assets | 362,863 |
Total assets acquired | 966,172 |
Accounts payable | 9,064 |
Accrued expenses | 16,987 |
Income taxes payable | 210 |
Deferred revenue | 37,250 |
Deferred income taxes | 96,182 |
Other liabilities | 2,821 |
Total liabilities acquired | 162,514 |
Purchase price, net of cash acquired | $ | 803,658 |
The preliminary fair value of other intangible assets consists of the following (in thousands):
| Fair Value Recognized |  | Weighted-Average Useful Life
Tradename | $ | 200,000 |  |  | N/A
Customer relationships | 32,663 |  |  | 3.0 years
Developed Technology | 87,000 |  |  | 4.0 years
In-Process Research & Development | 12,700 |  |  | 5.0 years
Strategic Developer Relationships | 30,500 |  |  | 6.0 years
Total intangible assets | $ | 362,863 |  |  |
The Company engaged a third-party valuation firm to assist management in its analysis of the fair value of tangible and intangible assets acquired. All estimates, key assumptions and forecasts were either provided by or reviewed by the Company. While the Company chose to utilize a third-party valuation firm, the fair value analysis and related valuation represents the conclusions of management and not the conclusions of any third party. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the related assets as follows: 1 to 5 years for computer hardware and software and 2 to 10 years for office furniture, fixtures and equipment. The estimated useful lives for leasehold improvements is 3 to 10 years based on the shorter of the estimated useful life of the improvement or the lease term. The tradename was valued using the relief-from-royalty method of the income approach, which estimates the fair value of the intangible asset by discounting the fair value of the hypothetical royalty payments a market participant would be willing to pay to enjoy the benefits of the asset. A royalty rate of 5.0% was used based on a review of third-party licensing agreements given Big Fish Games’ brand recognition and competitive position in the market. The tradename was assigned an indefinite life based on the Company’s intention to keep the Big Fish Games name for an indefinite period of time. In valuing the customer relationships, the replacement cost method of the cost approach was used. The value was determined based on the number of paying customers and average cost per customer. Developed technology was valued using the relief-from-royalty method of the income approach based upon revenues derived from games within the premium paid, casino and casual free-to-play categories. Big Fish Games pays royalties of 10.0% and 25.0% to its developers and these rates were used in the valuation. As of the valuation date, Big Fish Games had a portfolio of free-to-play games expected to launch in 2015 and one game expected to launch in 2016. The Company estimated that the majority of the revenues associated with games launched in 2015 would be 5 years and the game launched in 2016 would be 6 years. The fair value was calculated using the relief-from-royalty method of the income approach and a royalty rate of 10.0% was used in the valuation. Strategic developers are third-party alliance partners that develop content exclusively for Big Fish Games. In the valuation of strategic developer relationships, the comparative method of the income approach was used to calculate the fair value. In estimating the fair value, the analysis considered the differences in the present value of the cash flows associated with the strategic developers and without the strategic developers. As of the valuation date, the fair value of Big Fish Games’ deferred revenue was $37.3 million, which reflects the costs including network and delivery, royalties, third party platform fees, game operations and corporate expenses, plus a market participant margin. Goodwill of $538.9 million arising from the acquisition consisted largely of projected future revenue and profit growth, including benefits from Big Fish Games’ expertise in the mobile and online games industry, particularly social casinos. All of the goodwill was assigned to Big Fish Games, which remains a stand-alone business within the Company for purposes of segment reporting. None of the goodwill recognized will be deducted for tax purposes. The acquisition of Big Fish Games is included in Acquisition of businesses, net of cash acquired in the investing section of the Consolidated Statements of Cash Flows in the amount $366.0 million, net of cash acquired of $34.7 million. Included in non-cash investing activities is common stock issued in connection with the acquisition of $15.8 million, earnout liability of $324.7 million, and deferred payments of $97.1 million. Acquisition-related costs in the amount of $6.4 million were charged directly to operations and were included in Selling, general and administrative expenses on the Consolidated Statements of Comprehensive Income. Acquisition-related costs include legal, advisory, valuation, accounting and other fees incurred to effect the business combination. During the period from December 16, 2014 through December 31, 2014, Big Fish Games contributed revenues of $13.9 million and loss from continuing operations before provision for income taxes of $2.9 million. Saratoga Harness Racing, Inc. ("SHRI") Joint Venture On May 13, 2014, the Company entered into a 50% joint venture with SHRI to bid on the development, construction and operation of the Capital View Casino & Resort located in the Capital Region near Albany, New York. On June 30, 2014, the Company filed an application with the New York State Facility Location Board to obtain a license to build and operate a facility with approximately 1,500 slot machines, 56 table games, a 100-room hotel and multiple entertainment and dining options. On December 17, 2014, the New York State Facility Location Board recommended that the Capital Region license be granted to another bidder. During the year ended December 31, 2014, the Company incurred $1.0 million in equity losses in our other investments segment associated with the license application process and funded $3.3 million to the joint venture. As a result of the bid decision, the Company recorded an impairment loss of $1.6 million to reduce the Company's investment in the joint venture to its fair market value. Oxford Casino Acquisition On July 17, 2013, the Company completed its acquisition of Oxford Casino (“Oxford”) in Oxford, Maine for cash consideration of approximately $168.6 million. The transaction included the acquisition of a 25,000-square-foot casino and various dining facilities. The acquisition continued the Company's diversification and growth strategies to invest in assets with rates of returns attractive to the Company's shareholders. The Company financed the acquisition with borrowings under its Senior Secured Credit Facility. During the years ended December 31, 2014 and 2013, Oxford recognized revenues of $76.5 million and $34.4 million, respectively, and earnings from continuing operations of $14.0 million and $6.1 million, respectively, subsequent to its acquisition by the Company. The following table summarizes (in thousands) the fair values of the assets acquired and liabilities assumed, net of cash acquired of $13.7 million, at the date of the acquisition.
| Total
Accounts receivable | $ | 252 |
Prepaid expenses | 675 |
Inventory | 124 |
Property and equipment | 45,105 |
Goodwill | 50,202 |
Other intangible assets | 64,693 |
Total assets acquired | 161,051 |
Accounts payable | 1,063 |
Accrued expenses | 5,111 |
Other liabilities | 5 |
Total liabilities acquired | 6,179 |
Purchase price, net of cash acquired | $ | 154,872 |
The fair value of other intangible assets consists of the following (in thousands):
| Total
Slot gaming rights | $ | 58,500 |
Customer relationships | 1,700 |
Tradename | 2,400 |
Other intangibles | 2,093 |
Total intangible assets | $ | 64,693 |
Depreciation of property and equipment acquired is calculated using the straight-line method over the estimated remaining useful lives of the related assets as follows: 2 to 5 years for computer hardware and software, 2 to 9 years for equipment, 6 years for furniture and fixtures, 40 years for buildings and 14 years for building improvements. Amortization of definite-lived intangible assets acquired is calculated using the straight-line method over the estimated useful life of the related intangible asset. Intangible assets include customer relationships valued at $1.7 million with a life of 6 years. Other intangibles include table game fees paid to the State of Maine which is amortized over the 20-year contract period. Slot gaming rights and tradename are determined to have indefinite lives and are not being amortized. Goodwill of $50.2 million was recognized given the expected contribution of the Oxford acquisition to the Company's overall business strategy. The entire balance of goodwill has been allocated to the Casinos business segment. The Company expects to deduct goodwill for tax purposes. Pro Forma (unaudited) The following table illustrates the effect on net revenues, earnings from continuing operations and earnings from continuing operations per common share as if the Company had acquired Big Fish Games and Oxford as of the beginning of 2013. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have occurred had the acquisitions of Big Fish Games and Oxford been consummated at the beginning of 2013.
| Year Ended December 31,
| 2014 |  | 2013
Net revenues | $ | 1,126,592 |  |  | $ | 1,085,518 |
Earnings from continuing operations | $ | 64,145 |  |  | $ | 11,182 |
For the year ended December 31, 2013 earnings from continuing operations includes Company and Big Fish related non-recurring acquisition costs of $23.1 million.

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- Definition Tabular disclosure of a material business combination completed during the period, including background, timing, and recognized assets and liabilities. This table does not include leveraged buyouts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 + Details
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