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Property and Equipment

12 Months Ended

Dec. 31, 2011

(4) Property and Equipment

Property and equipment, including assets under capital leases, consist of the following:

	As of December 31,

	2011			2010
Machinery, equipment and deferred installation costs	$	661,733		$	654,652
Land and buildings		65,379			65,181
Transportation equipment		3,490			4,274
Furniture and fixtures		12,679			12,773
Leasehold improvements		12,864			13,440
Construction in progress		32,384			26,047

Property and equipment, at cost		788,529			776,367
Less: accumulated depreciation		(362,041	)		(325,786	)

Net property and equipment	$	426,488		$	450,581

Depreciation expense for the years ended December 31, 2011, 2010 and 2009 was approximately $76,900, $99,700 and $104,300, respectively.

Cost for equipment associated with specific lottery and gaming contracts not yet placed into service are recorded as construction in progress and not depreciated. When the equipment is placed into service the related costs are transferred from construction in progress to machinery and equipment, and we commence depreciation.

Depreciation expense is excluded from cost of sales and other operating expenses and is separately stated with amortization expense on the Consolidated Statements of Operations.

During the fourth quarter of 2010, we recorded long-lived asset impairment charges of approximately $17,500 related to underperforming Lottery Systems contracts. The fair value of the assets related to these contracts was approximately $32,200. We determine the fair value of the assets by using Level 3 valuation techniques within the fair value hierarchy and based on the present value of future cash flows of the respective contracts. The impairment charges are included in depreciation and amortization expense in our Consolidated Statements of Operations for the year ended December 31, 2010. During the fourth quarter of 2010, we also recorded an impairment charge of approximately $3,000 related to obsolete Lottery Systems equipment.

We recorded accelerated depreciation expense of approximately $6,400 and $8,300 in 2011 and 2010, respectively. As a result of Global Draw's transition to a new platform technology, we also recorded an impairment charge of approximately $2,500 in 2010 related to obsolete Global Draw equipment.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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