International Game Technology News
International Game Technology Reports Second Quarter Fiscal Year 2008 Results
The second quarter of the current year was unfavorably impacted by a number of significant items including a steep decline in interest rates, technological obsolescence charges related to the transition toward our new cabinets and platforms, additional bad debt provisions and discrete tax items. Collectively, these items totaled
"IGT's second quarter results were challenged by the current market environment," said Chairman and CEO TJ Matthews. "We remain focused on strategic initiatives which will maintain our standing as the leading worldwide provider of innovative gaming products and services. We continue to prepare for the introduction of the next generation of technological innovations and look forward to the market-driven expansion in domestic and international jurisdictions we believe will develop in the near future. Recent strategic accomplishments that will enhance IGT's long-term opportunities include our sb(TM)-related agreements with
Gaming Operations
Second quarter revenues and gross profit from gaming operations were
Gaming operations gross profit and margins were impacted by the significant decline in interest rates during the quarter. A 200 basis-point reduction in interest rates resulted in
As of
Product Sales Quarters Ended Six Months Ended March 31, March 31, 2008 2007 2008 2007 Revenues (in millions) North America $148.4 $180.6 $315.3 $388.0 International 83.8 88.0 230.5 198.0 Total $232.2 $268.6 $545.8 $586.0 Gross Margin North America 55% 55% 54% 55% International 54% 52% 53% 49% Total 55% 54% 54% 53% Units Shipped North America 6,500 9,700 13,900 21,900 International 5,600 9,100 18,500 23,700 Total 12,100 18,800 32,400 45,600
Worldwide product sales revenues generated second quarter gross profit of
For the six-month period ended
Operating Expenses and Other Income/Expense
Consolidated operating expenses totaled
Other expense, net, in the second quarter was
Cash Flows & Balance Sheet
In the first half of fiscal 2008, IGT generated
Working capital increased to
Capital Deployment
On
During the second quarter, IGT repurchased 2.3 million shares at an aggregate cost of
As previously announced on
Domestic callers dial 888-455-9641, passcode IGT
International callers dial 517-308-9004, passcode IGT
The conference call will also be broadcast live over the Internet. A link to the webcast is available at our website http://www.IGT.com/InvestorRelations. If you are unable to participate during the live webcast, the call will be archived until
Interested parties not having access to the Internet may listen to a taped replay of the entire conference call commencing at approximately
Domestic callers dial 866-396-4180
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In this release, we make some "forward looking" statements, which are not historical facts, but are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects and proposed new products, services, developments or business strategies. These statements are identified by their use of terms and phrases such as: anticipate; believe; could; estimate; expect; intend; may; plan; predict; project; forecast; on track; continue; and other similar terms and phrases including references to assumptions. These phrases and statements include, but are not limited to, the following:
— We remain focused on strategic initiatives which will maintain our standing as the leading worldwide provider of innovative gaming products and services We continue to prepare for the introduction of the next generation of technological innovations and look forward to the market-driven expansion in domestic and international jurisdictions we believe will develop in the near future — Recent strategic accomplishments that will enhance IGT's long-term opportunities include our sb(TM)-related agreements with Harrah's and CityCenter, our cross-licensing agreement with WMS, our strategic alliances with Progressive Gaming, Games Media and The Global Draw, and our potential acquisition of Cyberview Technology, Inc.
Actual results could differ materially from those projected or reflected in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent known and unknown risks and uncertainties. We do not intend, and undertake no obligation, to update our forward looking statements to reflect future events or circumstances. We urge you to carefully review the following discussion of the specific risks and uncertainties that affect our business. These include, but are not limited to:
— Unfavorable changes to regulations or problems with obtaining or maintaining needed licenses or approvals — Decline in the popularity of IGT games or unfavorable changes in player and operator preferences or a decline in play levels — Decreases in interest rates, which in turn increases our costs to fund jackpots — Slow growth in the number of new casinos or the rate of replacement of existing gaming machines — Failure to successfully develop and manage frequent introductions of innovative products — Failure to attract, retain and motivate key employees may adversely affect our ability to compete — Failure or inability to protect our intellectual property — Claims of intellectual property infringement or invalidity — Outstanding debt obligations and significant investments or financing commitments which could adversely impact our liquidity — Risks related to international operations
Historical results achieved are not necessarily indicative of future prospects of IGT. More information on factors that could affect IGT's business and financial results are included in our most recent Annual Report on Form 10-K and other public filings made with the Securities and Exchange Commission.
International Game Technology (http://www.IGT.com) is a global company specializing in the design, development, manufacturing, distribution and sales of computerized gaming machines and systems products.
Unaudited Condensed Consolidated Statements of Income Quarters Ended Six Months Ended March 31, March 31, 2008 2007 2008 2007 (In millions, except per share amounts) Revenues Gaming operations $341.0 $341.1 $673.4 $666.0 Product sales 232.2 268.6 545.8 586.0 Total revenues 573.2 609.7 1,219.2 1,252.0 Costs and operating expenses Cost of gaming operations 157.1 130.1 290.0 268.3 Cost of product sales 105.6 123.1 252.0 275.2 Selling, general and administrative 111.5 87.2 211.8 185.5 Research and development 53.8 47.8 105.1 97.1 Depreciation and amortization 18.6 19.3 37.8 38.4 Total costs and operating expenses 446.6 407.5 896.7 864.5 Operating income 126.6 202.2 322.5 387.5 Other income (expense), net (8.8) 2.3 (16.6) 6.7 Income before tax 117.8 204.5 305.9 394.2 Income tax provisions 49.4 76.3 123.8 145.0 Net income $68.4 $128.2 $182.1 $249.2 Basic earnings per share $0.22 $0.38 $0.58 $0.75 Diluted earnings per share $0.22 $0.38 $0.57 $0.73 Weighted average shares outstanding Basic 312.3 335.2 313.4 333.9 Diluted 315.9 340.2 317.2 342.4 Unaudited Condensed Consolidated Balance Sheets March 31, September 30, 2008 2007 (In millions) Assets Current assets Cash and equivalents $252.0 $261.3 Investment securities, at market value 5.2 51.3 Restricted cash and investments 101.3 88.1 Receivables, net 458.4 503.1 Inventories 180.7 144.8 Jackpot annuity investments 67.4 66.5 Other 258.7 171.9 Total current assets 1,323.7 1,287.0 Notes and contracts receivable, net 75.3 63.6 Property, plant and equipment, net 582.4 567.4 Jackpot annuity investments 438.5 441.5 Goodwill and intangibles, net 1,347.9 1,362.1 Other assets 596.8 445.9 Total assets $4,364.6 $4,167.5 Liabilities and Stockholders' Equity Current liabilities Current maturities of notes payable $0.9 $5.6 Accounts payable 108.2 121.1 Jackpot liabilities 190.6 170.7 Accrued income taxes 17.0 49.5 Dividends payable 43.9 44.4 Other accrued liabilities 244.7 300.2 Total current liabilities 605.3 691.5 Notes payable, net of current maturities 1,692.1 1,503.0 Non-current jackpot liabilities 468.6 472.4 Other liabilities 228.7 47.9 Total liabilities 2,994.7 2,714.8 Total stockholders' equity 1,369.9 1,452.7 Total liabilities and stockholders' equity $4,364.6 $4,167.5 Unaudited Condensed Consolidated Statements of Cash Flows Six Months Ended March 31, 2008 2007 (In millions) Operations Net income $182.1 $249.2 Depreciation, amortization, and asset charges 146.4 131.5 Other non-cash items 29.4 12.3 Changes in operating assets and liabilities: Receivables 49.7 15.5 Inventories (39.0) 0.7 Accounts payable and accrued liabilities (94.9) (22.3) Jackpot liabilities 0.1 (15.3) Income taxes (29.8) (21.3) Prepaid and other assets (49.0) 16.2 Cash from operations 195.0 366.5 Investing Capital expenditures (150.2) (181.9) Investments, net 67.1 7.1 Jackpot annuity investments, net 16.6 8.5 Changes in restricted cash (70.5) 4.6 Business acquisitions (3.0) (18.3) Other (6.0) 2.0 Cash from investing (146.0) (178.0) Financing Debt proceeds (repayments), net 184.1 248.7 Employee stock plans 81.7 54.8 Dividends paid (88.4) (87.2) Share repurchases (245.0) (362.7) Cash from financing (67.6) (146.4) Foreign exchange rates effect on cash 9.3 (1.4) Net change in cash and equivalents (9.3) 40.7 Beginning cash and equivalents 261.3 294.6 Ending cash and equivalents $252.0 $335.3 Unaudited Supplemental Data Quarters Ended Six Months Ended March 31, March 31, Calculation of Earnings Per Share 2008 2007 2008 2007 (In millions, except per share amounts) Net income $68.4 $128.2 $182.1 $249.2 Basic weighted average shares outstanding 312.3 335.2 313.4 333.9 Dilutive effect of stock awards 3.6 4.6 3.8 4.8 Dilutive effect of convertible debentures - 0.4 - 3.7 Diluted weighted average shares outstanding 315.9 340.2 317.2 342.4 Basic earnings per share $0.22 $0.38 $0.58 $0.75 Diluted earnings per share $0.22 $0.38 $0.57 $0.73 Quarters Ended Six Months Ended Reconciliation of Net Income to March 31, March 31, Adjusted EBITDA 2008 2007 2008 2007 (In millions) Net income $68.4 $128.2 $182.1 $249.2 Income tax provisions 49.4 76.3 123.8 145.0 Other (income) expense, net 8.8 (2.3) 16.6 (6.7) Depreciation and amortization 77.1 66.3 146.4 131.5 Share-based compensation 8.0 8.4 17.3 17.8 Adjusted EBITDA $211.7 $276.9 $486.2 $536.8
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including asset charges, share-based compensation, and other income/expense, net) is a supplemental non-GAAP financial measure used by our management and commonly used by industry analysts to evaluate our financial performance. Adjusted EBITDA provides useful information to investors regarding our ability to service debt and is a commonly used financial analysis tool for measuring and comparing gaming companies in several areas of liquidity, operating performance, valuation and leverage. Adjusted EBITDA should not be construed as an alternative to operating income (as an indicator of our operating performance) or net cash from operations (as a measure of liquidity) as determined in accordance with generally accepted accounting principles. All companies do not calculate Adjusted EBITDA in the same manner and IGT's presentation may not be comparable to those presented by other companies.
Reconciliation of Cash from Operations to Free Six Months Ended Cash Flow March 31, 2008 2007 (In millions) Cash from operations $195.0 $366.5 Investment in property, plant and equipment (52.4) (77.2) Investment in gaming operations equipment (91.9) (95.3) Investment in intellectual property (5.9) (9.4) Free Cash Flow before dividends 44.8 184.6 Dividends paid (88.4) (87.2) Free Cash Flow $(43.6) $97.4
Free cash flow is a supplemental non-GAAP financial measure used by our management and commonly used by industry analysts to evaluate the discretionary amount of our net cash from operations. Net cash from operations is reduced by amounts expended for capital expenditures and dividends paid. Free cash flow should not be construed as an alternative to net cash from operations or other cash flow measurements determined in accordance with generally accepted accounting principles. All companies do not calculate free cash flow in the same manner and IGT's presentation may not be comparable to those presented by other companies.
Unaudited Supplemental Data (continued) Significant items affecting Income statement Quarters Ended comparability line impacted March 31, 2008 2007 (In millions) favorable (unfavorable) Decline in interest rates Cost of gaming (jackpot funding) operations $(12.3) $- Hurricane insurance Cost of gaming gain, property operations - 5.0 Fixed asset charges Cost of gaming (technological obsolescence) operations (8.0) - Inventory write-downs Cost of product (technological obsolescence) sales (2.4) - Bad debt provision Sales, General, & Administrative (5.8) 4.4 Hurricane insurance Sales, General, gain, business interruption & Administrative - 12.0 Gain on sale of Sales, General, corporate plane & Administrative - 5.8 Subtotal amounts before tax Income before tax $(28.5) $27.2 Tax effect Income tax provision 10.7 (10.1) Discrete tax items Income tax provision (2.6) - Total amounts after tax $(20.4) $17.1
SOURCE International Game Technology
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