GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2012

GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

7. GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

The gross carrying value, accumulated impairment and net carrying value of each major component of our goodwill and other indefinite-lived intangible assets at December 31 is as follows:

	2012						2011

	Gross Carrying Value		Accumulated Impairment		Net Carrying Value		Gross Carrying Value		Accumulated Impairment		Net Carrying Value
	(in thousands)
Goodwill	$	494	$	494	$	—	$	494	$	494	$	—
Licensing costs		136,094		—		136,094		85,577		—		85,577

	$	136,588	$	494	$	136,094	$	86,071	$	494	$	85,577

As discussed in Note 8, we are required, as defined by the framework for the expansion of gaming in Ohio, to submit a $50.0 million Video Lottery Sales Agent License (the "License") fee to be paid upon achievement of certain milestones. As of December 31, 2012, we have paid a total of $25.0 million of the $50.0 million; $10.0 million upon filing the application and $15.0 million upon commencement of our VLT operations. In addition, at the commencement of our gaming operations in June 2012, we became contractually obligated for the remaining $25.0 million installment for the License and have reflected this amount within license fee payable in the consolidated balance sheet at December 31, 2012. The license fee, including the final installment, is recorded as an indefinite-lived intangible asset on our consolidated balance sheet as of December 31, 2012. The final installment will be payable at the one year anniversary of the commencement of our VLT operations in June 2013.

Upon the acquisition of Scioto Downs in 2003, MTR offered to pay $32 per share, in cash, for the 595,767 outstanding shares of Scioto Downs' common stock. Each Scioto Downs shareholder was given the option to receive, in lieu of the $32 per share amount, an amount per share equal to $17 plus one Contingent Earn-out Participation right (CEP right) per share. The CEP Rights entitled the permitted holder to receive contingent earn-out payments based upon 10% of the growth of Scioto Downs' EBITDA compared to the average of Scioto Downs' EBITDA for the three years ended October 31, 2002, for each of the (10) calendar years beginning on January 1 of the year following the year in which the triggering event (defined below) occurs. The triggering event is defined to mean (1) state or federal legislation shall have been enacted that permits Scioto Downs to operate enhanced forms of gaming not permitted by law as of the consummation of the Merger exclusive of pari-mutual or internet gaming at Scioto Downs (2) Scioto Downs shall have in fact commenced operating such enhanced forms of gaming at Scioto Downs. At the time of the acquisition, holders of 10,707 shares elected to receive the CEP Rights but due to the Company's inability to estimate the amount and timing of the CEP Rights, no estimate was made at the time of acquisition. In May 2012, the triggering event for the contingent earn-out payments occurred when Scioto received their permanent License and began operations of its newly constructed VLT gaming facility in June 2012. At December 31, 2012, a liability for the estimated fair present value of the earn-out payments of $0.5 million was recorded. The significant assumptions used to calculate the CEP Rights included revenue and cost projections to arrive at cash flows over the 10-year defined period and a discount factor of approximately 15%. We consider these fair value measurements to be Level 3 inputs within the fair value hierarchy. The CEP Rights are considered additional consideration of the acquisition Scioto Downs. The Company increased the value of the indefinite-lived intangible asset by this amount, as a result of the negative goodwill attributed to the license in the Company's original purchase accounting.

In accordance with the requirements of ASC 350, we performed the annual impairment tests of our other indefinite-lived intangible assets at the end of our fiscal year. For the years ended December 31, 2012 and 2010, we conducted our annual impairment test and concluded that the fair value of our indefinite-lived intangibles exceeded their carrying value, and no impairment charge was necessary.

At January 1, 2011, goodwill of $0.5 million existed at Presque Isle Downs and was associated with the 2007 acquisition of an off-track wagering facility in Erie, Pennsylvania. The carrying value of the net assets of Presque Isle Downs was negative (which is attributed primarily to debt incurred in connection with the original construction of the casino and race track) at January 1, 2011. Upon adoption of ASU 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts, we reassessed the Presque Isle Downs goodwill impairment test, including allocation of the fair value of the reporting unit to the various tangible and intangible assets and liabilities of Presque Isle Downs, we concluded that the goodwill was impaired. Impairment was recorded through an adjustment to decrease beginning retained earnings of $0.3 million (net of $0.2 million of deferred income taxes) at January 1, 2011, to reflect the adoption of ASU 2010-28 and the corresponding impairment of the Presque Isle Downs' goodwill.

- 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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