Goodwill and Intangibles

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLES

Changes in the carrying amount of goodwill are as follows (in thousands):



	June 30, 2014						December 31, 2013
	Gross Carrying amount		Accumulated Impairment		Net Carrying Value		Gross Carrying amount		Accumulated Impairment		Net Carrying Value
Goodwill	$	76,264	$	—	$	76,264	$	60,384	$	—	$	60,384

Intangible assets consist of the following (in thousands):



		June 30, 2014							December 31, 2013
	Useful life (years)	Gross Value		Accumulated Amortization			Net Carrying Value		Gross Value		Accumulated Amortization			Net Carrying Value
Trade name - “American Gaming Systems”	Indefinite	$	12,126	$	—		$	12,126	$	12,126	$	—		$	12,126
Trade name - “Gambler’s Choice”	7	809		(61		)	748		809		(3		)	806
Customer agreements and relationships as a result of purchase accounting in connection with the Acquisition	7	60,112		(4,548		)	55,564		60,112		(254		)	59,858
Customer agreements and relationships as a result of the C2 Gaming acquisition	7	5,201		(114		)	5,087		—		—			—
Customer agreements	1 - 7	154		(9		)	145		—		—			—
Third party licenses	3 - 5	11,520		(1,253		)	10,267		11,520		(70		)	11,450
Internally developed gaming software	1 - 5	13,976		(1,886		)	12,090		12,474		(108		)	12,366
Purchased software	1 - 5	6,609		(455		)	6,154		2,076		(18		)	2,058
		$	110,507	$	(8,326	)	$	102,181	$	99,117	$	(453	)	$	98,664

The above amounts as of June 30, 2014 and December 31, 2013, include net fair value adjustments recorded as part of purchase accounting that increased the aggregate carrying value of intangible assets and resulted in the recognition of $60.4 million in goodwill as of the Closing Date that was further adjusted to $63.8 million as of June 30, 2014 (see Note 3).

The Company recognized an additional $12.4 million in goodwill as a result of the acquisition of C2 Gaming.

Upon the application of purchase accounting, on the Closing Date, the Company recognized $12.1 million in an indefinite life trade name related to the “American Gaming Systems” trade name and $0.8 million in a trade name related to the “Gambler’s Choice” trade name with a useful life of 7 years. Additionally, the Company recorded $60.1 million in customer agreements and relationships on the Closing Date as a result of the valuation. The Company reviewed the terms of the agreements and the historical relationship with their existing customers and determined a useful life of 7 years.

Upon the application of purchase accounting, in connection with the acquisition of C2 Gaming, the Company recognized $5.2 million in customer relationships and $4.3 million in purchased software on May 6, 2014.

Intangibles are amortized over the respective useful lives of the assets ranging from one to seven years. Amortization expense related to intangibles, inclusive of accretion of contract rights under development agreements and customer agreements, was $4.2 million and $4.1 million for the three months ended June 30, 2014 and 2013, respectively, and $7.9 million and $8.9 million for the six months ended June 30, 2014 and 2013, respectively. Included in depreciation and amortization expense is amortization of internally developed software of $1.0 million and $0.7 million for the three months ended June 30, 2014 and 2013, respectively and $1.8 million and $1.7 million for the six months ended June 30, 2014 and 2013, respectively.

Management reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No triggering events were identified for the six months ended June 30, 2014.

- 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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