Equity Method Investments

3 Months Ended

Mar. 31, 2014

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Equity Method Investments

The following provides an update for events that occurred during the three months ended March 31, 2014 related to our equity method investments, which are disclosed in Note 11 in our 2013 Annual Report on Form 10-K.

Northstar Illinois

Under the terms of a PMA, Northstar Illinois is entitled to receive annual incentive compensation payments to the extent it is successful in increasing the Illinois lottery's net income (as defined in the PMA) above specified target levels, subject to a cap of 5% of the applicable year's net income. Northstar Illinois is responsible for payments to the State to the extent such targets are not achieved, subject to a similar cap. We understand that the lottery has asserted that Northstar Illinois is responsible for shortfall payments of approximately $22 million with respect to its fiscal year ended June 30, 2012 and approximately $39 million with respect to its fiscal year ended June 30, 2013. We further understand that Northstar Illinois disagrees with the methodology used by the lottery in calculating the lottery's net income for each such fiscal year that formed the basis of the lottery's shortfall payment claim, believes that certain other matters that could impact any potential shortfall payment have yet to be resolved and has initiated the resolution process contemplated by the PMA in an attempt to resolve these matters.

We understand that, despite the disagreement with the methodology, in light of the completion of the lottery's financial statements for the fiscal year ended June 30, 2012, and based on preliminary financial information for the lottery's fiscal year ended June 30, 2013, Northstar Illinois recorded a liability of $42.0 million associated with its estimate of the potential aggregate net shortfall payments for the first three fiscal years under the PMA. We amortize our 20% share of the $42.0 million of estimated net shortfall payments recorded by Northstar Illinois over the ten-year life of the contract, which reduces our earnings from our equity investment in Northstar Illinois.  This amount was not material to our results of operations for the three months ended March 31, 2014. Any increase to the estimated liability would result in our recording our 20% share of such amount as a charge in our Consolidated Statements of Operations and Comprehensive Loss.

Sportech

In January 2014, we completed the sale of our 20% equity interest in Sportech for cash proceeds of £27.8 million, or $44.9 million, resulting in a gain of approximately £9 million, or $14.5 million, which is reflected as gain on sale of equity interest in our Consolidated Statements of Operations and Comprehensive Loss.

LNS

During the three months ended March 31, 2014, we received a distribution of capital of $22.4 million and a dividend of $18.2 million from LNS.

ITL

During the three months ended March 31, 2014, we contributed $17.7 million to ITL.