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International Game Technology Reports First Quarter Fiscal Year 2008 Results
RENO, Nev., Jan. 17 /PRNewswire-FirstCall/ -- International Game Technology (NYSE: IGT) announced today operating results for the first quarter ended December 31, 2007. Consolidated revenues and gross profit for the quarter were $645.8 million and $366.5 million, respectively, compared to $642.3 million and $352.0 million in the prior year quarter. Consolidated gross margins for the first quarter came in at 57%, up from 55% in the prior year quarter. Net income in the first quarter totaled $113.7 million or $0.36 per diluted share, compared to $121.0 million and $0.35 per diluted share in the prior year quarter. "During the first quarter, IGT made progress towards achieving our long-term objectives, including demonstrating at the Global Gaming Expo this past November our vision for the right slot floor today and in the future. Operationally we continued to generate margin improvements and moderate revenue growth despite reduced marketplace demand," said Chairman and CEO TJ Matthews. Gaming Operations First quarter revenues and gross profit from gaming operations improved to $332.3 million and $199.4 million, respectively, compared to $324.9 million and $186.7 million for the same period in the prior year. Gaming operations gross margins for the first quarter were 60% compared with the prior year quarter at 57%. Revenue and gross profit growth were primarily driven by an increase of 5,700 units in our installed base from the prior year quarter. Year-over-year lease operations placements increased 2,300 units, mainly in Mexico, New York and Rhode Island. Casino operations placements increased 3,400 units year-over-year as a result of expansion in Oklahoma and Florida. Compared to the fourth quarter of fiscal 2007, casino operations units increased 100 units and lease operations units were down 500 due to temporary removals in Mexico.
Product Sales
Quarters Ended
December 31
2007 2006
Revenues (in millions)
North America $166.9 $207.3
International 146.6 110.1
Total $313.5 $317.4
Gross Margin
North America 54% 55%
International 52% 46%
Total 53% 52%
Units Shipped
North America 7,300 12,200
International 12,900 14,600
Total 20,200 26,800
Worldwide product sales revenues produced first quarter revenues and gross profits of $313.5 million and $167.2 million, respectively, compared to $317.4 million and $165.3 million in the prior year quarter. Worldwide shipments totaled 20,200 units compared to 26,800 units in the first quarter of last year. Gross profits increased despite the 25% reduction in shipments due to favorable product and geographic mix. Non-machine revenues increased to $99.3 million or 32% of total product sales from $84.8 million or 27% of total product sales in the comparable prior year quarter, primarily as a result of growth in network systems sales. North America shipments of 7,300 units were off 40% from the comparable prior year quarter total of 12,200, while product sales revenues decreased only 19% for the same period. Non-machine revenues were $76.1 million in the first quarter or 46% of product sales, up from $69.2 million or 33% of product sales in the prior year quarter. Units shipped were down due to a reduction in replacement demand. International product sales revenues improved 33% from the comparable prior year quarter due to favorable product mix. During the first quarter, international machine shipments totaled 12,900 units versus 14,600 units last year, with lower shipments into Japan and the UK partially offset by increased shipments into all other international markets. Non-machine revenues totaled $23.2 million or 16% of international product sales compared to $15.6 million or 14% in the prior year quarter. Operating Expenses and Other Income/Expense First quarter operating expenses increased to $170.8 million from $166.8 million in the prior year quarter, primarily due to additional staffing initiatives and a greater investment in research and development. Other expense, net, was $7.6 million in the first quarter compared to other income, net, of $4.5 million in the prior year quarter. Higher other expense was driven by increased interest expense from additional borrowings under our credit facility. Cash Flows & Balance Sheet IGT generated $120.2 million in operating cash flow on net income of $113.7 million in the first quarter, down from $223.5 million and $121.0 million, respectively, in the prior year quarter. Operating cash flow decreased primarily due to additional prepayments to secure long-term licensing rights and timing of payments in working capital. First quarter capital expenditures totaled $62.7 million compared to $103.8 million in the prior year quarter. Working capital increased to $665.9 million at December 31, 2007 compared to $595.5 million at September 30, 2007. Cash equivalents and short-term investments (inclusive of restricted amounts) totaled $415.8 million at December 31, 2007 versus $400.7 million at September 30, 2007. Debt totaled $1.6 billion at December 31, 2007 compared to $1.5 billion at September 30, 2007. Capital Deployment On December 10, 2007, our Board of Directors declared a quarterly cash dividend of fourteen cents ($0.14) per share, paid on January 7, 2008 to shareholders of record on December 24, 2007. IGT repurchased 3.5 million shares during the first quarter for a total cost of $149.2 million. The remaining authorization under the Company's stock repurchase program totaled 29.8 million shares at December 31, 2007. As previously announced on December 20, 2007, IGT will host a conference call regarding its First Quarter Fiscal Year 2008 earnings release on Thursday, January 17, 2008 at 6:00 a.m. (Pacific Standard Time). The access numbers are as follows: 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 Friday, January 25, 2008 at http://www.IGT.com/InvestorRelations. Interested parties not having access to the Internet may listen to a taped replay of the entire conference call commencing at approximately 8:00 a.m. (Pacific Standard Time) on Thursday, January 17, 2008. This replay will run through Friday, January 25, 2008. The access numbers are as follows: Domestic callers dial 800-293-4240
International callers dial 203-369-3224
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:
-- IGT made progress towards achieving our long-term objectives,
including demonstrating at the Global Gaming Expo this past November
our vision for the best slot floor today and in the future.
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 needed
licenses or approvals
-- Decline in the popularity of IGT games or unfavorable changes in
player and operator preferences
-- 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
December 31,
2007 2006
(In millions, except per share amounts)
Revenues
Gaming operations $332.3 $324.9
Product sales 313.5 317.4
Total revenues 645.8 642.3
Costs and operating expenses
Cost of gaming operations 132.9 138.2
Cost of product sales 146.4 152.1
Selling, general and administrative 100.3 98.4
Research and development 51.3 49.3
Depreciation and amortization 19.2 19.1
Total costs and operating expenses 450.1 457.1
Operating income 195.7 185.2
Other income (expense), net (7.6) 4.5
Income before tax 188.1 189.7
Income tax provisions 74.4 68.7
Net income $113.7 $121.0
Basic earnings per share $0.36 $0.36
Diluted earnings per share $0.36 $0.35
Weighted average shares outstanding
Basic 314.4 332.5
Diluted 318.4 343.9
Unaudited Condensed Consolidated Balance Sheets
December 31, September 30,
2007 2007
(In millions)
Assets
Current assets
Cash and equivalents $285.9 $261.3
Investment securities, at market value 31.1 51.3
Restricted cash and investments 98.8 88.1
Receivables, net 487.5 503.1
Inventories 140.1 144.8
Jackpot annuity investments 66.8 66.5
Other 161.0 171.9
Total current assets 1,271.2 1,287.0
Notes and contracts receivable, net 74.5 63.6
Property, plant and equipment, net 564.7 567.4
Jackpot annuity investments 439.9 441.5
Goodwill and intangibles, net 1,354.0 1,362.1
Other assets 526.2 445.9
Total assets $4,230.5 $4,167.5
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of notes payable $9.8 $5.6
Accounts payable 96.6 121.1
Jackpot liabilities 181.6 170.7
Accrued income taxes 48.1 49.5
Dividends payable 44.0 44.4
Other accrued liabilities 225.2 300.2
Total current liabilities 605.3 691.5
Notes payable, net of current
maturities 1,617.1 1,503.0
Non-current jackpot liabilities 468.8 472.4
Other liabilities 161.3 47.9
Total liabilities 2,852.5 2,714.8
Total stockholders' equity 1,378.0 1,452.7
Total liabilities and stockholders' equity $4,230.5 $4,167.5
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended
December 31,
2007 2006
(In millions)
Operations
Net income $113.7 $121.0
Depreciation, amortization and other
non-cash items 78.2 82.5
Changes in operating assets and liabilities:
Receivables 22.4 (3.8)
Inventories 3.2 11.9
Accounts payable and accrued liabilities (103.6) (45.1)
Jackpot liabilities (3.5) 6.4
Income taxes 48.7 48.5
Prepaid and other assets (38.9) 2.1
Cash from operations 120.2 223.5
Investing
Capital expenditures (62.7) (103.8)
Investments, net 15.0 (305.6)
Jackpot annuity investments, net 8.6 (1.1)
Changes in restricted cash (5.3) 0.5
Business acquisitions - (18.3)
Other (6.8) (14.9)
Cash from investing (51.2) (443.2)
Financing
Debt proceeds (repayments), net 118.2 866.1
Employee stock plans 30.5 23.5
Dividends paid (44.4) (43.5)
Share repurchases (149.2) (225.4)
Cash from financing (44.9) 620.7
Foreign exchange rates effect on cash 0.5 (3.7)
Net change in cash and equivalents 24.6 397.3
Beginning cash and equivalents 261.3 294.6
Ending cash and equivalents $285.9 $691.9
Unaudited Supplemental Data
Quarters Ended
December 31,
Calculation of Earnings Per Share 2007 2006
(In millions, except per share amounts)
Net income $113.7 $121.0
Basic weighted average shares outstanding 314.4 332.5
Dilutive effect of stock awards 4.0 5.0
Dilutive effect of convertible debentures - 6.4
Diluted weighted average shares outstanding 318.4 343.9
Basic earnings per share $0.36 $0.36
Diluted earnings per share $0.36 $0.35
Quarters Ended
December 31,
Reconciliation of Net Income to Adjusted EBITDA 2007 2006
(In millions)
Net income $113.7 $121.0
Income tax provisions 74.4 68.7
Other (income) expense, net 7.6 (4.5)
Depreciation and amortization 69.3 65.3
Share-based compensation 9.3 9.4
Adjusted EBITDA $274.3 $259.9
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.
Three Months Ended
December 31,
Reconciliation of Cash from Operations
to Free Cash Flow 2007 2006
(In millions)
Cash from operations $120.2 $223.5
Investment in property, plant and equipment (23.1) (52.2)
Investment in gaming operations equipment (35.4) (45.8)
Investment in intellectual property (4.2) (5.8)
Free Cash Flow before dividends 57.5 119.7
Dividends paid (44.4) (43.5)
Free Cash Flow $13.1 $76.2
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. Website: http://www.igt.com/ |
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