The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from PR Newswire

International Game Technology Reports First Quarter Fiscal Year 2013 Results

Tuesday, January 22, 2013

International Game Technology Reports First Quarter Fiscal Year 2013 Results16:15 EST Tuesday, January 22, 2013LAS VEGAS, Jan. 22, 2013 /PRNewswire/ --First Quarter Highlights (compared to last year's first quarter)Total revenues increased 19% to $530 million North America product sales revenue increased 54% GAAP earnings per share from continuing operations increased 41% to $0.24 Adjusted earnings per share from continuing operations increased 65% to $0.28 Sold 5,100 North America replacement units, up 82% Social gaming revenues increased 15% sequentially from the fiscal fourth quarter of 2012International Game Technology (NYSE: IGT) today reported operating results for the first quarter ended December 31, 2012. "Our robust first quarter results ? 19% revenue growth and a 65% increase in adjusted earnings per share from continuing operations ? provide a great start toward what we expect will be our fourth consecutive year of double digit growth in adjusted earnings per share from continuing operations," said Patti Hart, CEO of IGT. "We believe our strong performance demonstrates that our strategy is working and that IGT is moving in the right direction.  Through the remainder of fiscal 2013, we intend to build on this momentum by leveraging our core business, distributing our best-in-class content more broadly, and returning capital to shareholders."Consolidated Results($ in millions, except per share amounts)First Quarters EndedDecember 31,20122011% ChangeGAAP MeasuresRevenue$ 530.3$ 445.519%Operating income$ 118.4$ 99.919%Income from continuing operations$ 65.3$ 50.330%Earnings per share from continuing operations$ 0.24$ 0.1741%Net operating cash flows$ 94.5$ 64.846%Non-GAAP MeasuresAdjusted operating income$ 137.6$ 99.938%Adjusted income from continuing operations$ 76.2$ 50.351%Adjusted earnings per share from continuing operations$ 0.28$ 0.1765%Free cash flow (after dividends)$ 40.8$ (2.2)*Adjusted operating income, adjusted income from continuing operations, adjusted earnings per share from continuing operations and free cash flow are non-GAAP financial measures. Reconciliations between GAAP and non-GAAP measures are provided at the end of this release. No reconciliations for adjusted operating income, adjusted income from continuing operations, and adjusted earnings per share from continuing operations for the quarter ended December 31, 2011 are provided because no adjustments to GAAP measures were made, as indicated in the table above.Revenues increased 19% to $530 million in the first quarter, primarily due to growth in North America product sales and interactive. Adjusted earnings per share from continuing operations increased 65% to $0.28 for the first quarter. Non-GAAP adjusted financial measures for the first quarter ended December 31, 2012 reflect the exclusion of acquisition related charges for DoubleDown and the exclusion of a royalty settlement. Gaming Operations (excluding Interactive)($ in millions, unless otherwise noted)First Quarters EndedDecember 31,20122011% ChangeRevenue$ 242.6$ 252.0-4%Gross profit$ 153.1$ 153.9-1%Gross margin63%61%3%Installed base56,80055,6002%Average revenue per unit per day (0.00)$ 46.80$ 50.58-7%Revenues decreased 4% to $243 million in the first quarter driven by lower MegaJackpots® revenue partially offset by higher lease operations revenue. Gross margin increased to 63% from 61% in the first quarter, primarily due to an increase mix of lower-yielding higher-margin lease operations games and lower jackpot expenses. Installed base increases were driven by lease operations growth globally. Average revenue per unit per day in the first quarter was $46.80, down 7% over the prior year quarter and down 8% sequentially, primarily due to lower MegaJackpots® revenue and an increased mix of lower-yielding lease operations games.Product Sales($ in millions, unless otherwise noted)First Quarters EndedDecember 31,20122011% ChangeRevenue$ 234.8$ 180.930%Gross profit$ 125.6$   91.537%Gross margin53%51%4%Units recognized ('000)10.77.347%Average machine sales price ('000)$   14.8$   15.9-7%Revenues increased 30% to $235 million in the first quarter, due to increased North America machine sales related to Canadian and Illinois VLT customers, as well as increased non-machine intellectual property licensing fees. Units recognized increased 47% in the first quarter, primarily due to Canadian and Illinois VLT sales. North America gross margin increased to 56% from 53% in the first quarter, largely due to increased non-machine revenues, which included $5 million of royalty settlement fees. North America average machine sales price in the first quarter decreased 11% compared to the prior year quarter mainly due to an unfavorable pricing mix related to increased VLT sales.Interactive($ in millions, unless otherwise noted)First Quarters EndedDecember 31,20122011% ChangeRevenue$ 52.9$ 12.6320%Social gaming$ 41.3-* IGTi$ 11.6$ 12.6-8%Gross Margin58%52%12%Social gaming60%-* IGTi51%52%-2%Double Down Average User Statistics*DAU (Daily active users) ('000)1,462-*MAU (Monthly active users) ('000)4,931-*Bookings per DAU (0.00)$ 0.31-**as a single application with multiple games, active users equal unique usersSocial gaming revenues in the first quarter increased 15% sequentially to $41 million, primarily driven by an increase in both average DAU and average bookings per DAU. Average DAU were 1.5 million in the first quarter, an increase of 3% compared to the prior sequential quarter. Average bookings per DAU increased 11% sequentially to $0.31 in the first quarter.Operating Expenses and Other Income/Expense($ in millions)First Quarters EndedDecember 31,20122011% ChangeOperating ExpensesSelling, general & administrative$ 100.2$   89.712%Research & development54.446.916%Depreciation & amortization19.015.423%Contingent acquisition related costs17.5-*Total operating expenses$ 191.1$ 152.026%Adjusted Operating Expenses    Total$ 169.2$ 152.011%Adjusted operating expenses is a non-GAAP financial measure.  Reconciliations between GAAP and non-GAAP measures are provided at the end of this release.  No reconciliation for adjusted operating expenses for the quarter ended December 31, 2011 is provided because no adjustments to GAAP operating expenses were made, as indicated in the table above.First quarter operating expenses increased over the prior year quarter primarily due to additional expenses from DoubleDown. Adjusted operating expenses were 32% of revenues for the first quarter compared to 34% of revenues in the prior year quarter.Balance Sheet and Capital Deployment($ in millions)December 31,September 30,20122012% ChangeCash and equivalents (including restricted amounts)$            277.0$              288.2-4%Working capital$            616.0$              633.0-3%Contractual debt obligations$         1,715.0$           1,790.0-4%During the first quarter, the company received 2.5 million shares related to the previously announced accelerated stock buyback (ASB).  The total number of shares delivered to IGT under the ASB was 30 million, at an average price of $13.22 per share, representing over 10% of the total shares outstanding when the program commenced. During the first quarter, the company returned $16 million to shareholders in the form of dividends. The company paid down $75 million of its contractual debt obligations during the first quarter.OtherReferences to per share amounts in this release are based on diluted shares of common stock, unless otherwise specified.  Reconciliations of all GAAP to Non-GAAP Adjusted financial measures are provided at the end of this release.OutlookBased on current expectations and the operating results for the first quarter of fiscal 2013, the company is reaffirming its fiscal year 2013 guidance for adjusted earnings from continuing operations of $1.20 to $1.30 per share.  GAAP earnings per share from continuing operations for fiscal year 2013 will include acquisition-related expenses, primarily related to DoubleDown, the amount of which are not determinable at this time.  The company may also recognize charges for impairment, other acquisition-related expenses, resolution of certain tax items, and/or other items that are not currently determinable, but may be significant. For this reason, the Company is unable to provide estimates for full-year GAAP earnings per share from continuing operations at this time.Earnings Conference CallAs previously announced on Jan. 9, 2013, IGT will host a conference call to discuss its First Quarter 2013 earnings results on Tuesday, Jan. 22, 2013, at 2:00 p.m. PST. The access numbers are as follows:Domestic callers dial +1 888-829-8676, passcode IGT International callers dial +1 773-756-4709, passcode IGT The conference call will also be broadcast live over the Internet. A link to the webcast is available at the IGT website:  The call will be archived until Tuesday, Feb. 5, 2013 at, for those interested parties that are unable to participate during the live webcast. A taped replay of the conference call will be available after the conference call. This replay will run through Tuesday, Feb. 5, 2013.  The access numbers are as follows:Domestic callers dial +1 866-489-8039International callers dial +1 203-369-1674Q1 FY 2013 Excel fileQ1 FY 2013 PDF of this press releaseForward-Looking StatementsThis press release contains forward-looking statements that involve risks and uncertainties.  These statements include our expected future financial and operational performance (including our guidance for fiscal year 2013) and our strategic and operational plans.  These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the results predicted, and reported results should not be considered an indication of future performance.  Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: general economic conditions and changes in economic conditions affecting the gaming industry; new or changing laws or regulations or new interpretations of existing laws or regulations affecting our business; difficulties or delays in obtaining or maintaining necessary licenses or approvals; slow growth in the number of new gaming jurisdictions or new casinos or the rate of replacement of existing gaming machines; changes in operator or player preferences for our products; our ability to compete in the gaming industry with new or existing competitors; our ability to develop and introduce new products and their acceptance by our customers; risks related to our international operations; our ability to protect our intellectual property; adverse results of litigation, including intellectual property infringement claims; risks related to business combinations, investments in intellectual property and the integration of acquisitions; and future developments or changes affecting online gaming or social casino-style gaming, which is a new and evolving industry.  A further list and description of these and other risks, uncertainties and other matters can be found in our annual report and other reports filed with the Securities and Exchange Commission, including under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for fiscal 2012 filed with the SEC on November 28, 2012 and available on the SEC website at and on the investor relations section of our website at  Additional information will also be set forth in our Quarterly Report on Form 10-Q for our fiscal quarter ended December 31, 2012, which we expect to file with the SEC in the first quarter of calendar 2013.  All information provided in this release is as of January 22, 2013, and IGT does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances.Important Additional Information International Game Technology ("IGT"), its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from IGT stockholders in connection with the matters to be considered at IGT's 2013 annual meeting of stockholders. IGT intends to file a definitive proxy statement with the U.S. Securities and Exchange Commission (the "SEC") in connection with any such solicitation of proxies from IGT stockholders. IGT STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH PROXY STATEMENT AND ACCOMPANYING PROXY CARD WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Information regarding the ownership of IGT's directors and executive officers in IGT stock, restricted stock units and stock options is included in their SEC filings on Forms 3, 4 and 5, which can be found at IGT's website ( in the section "Investor Relations." More detailed information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with IGT's 2013 annual meeting of stockholders. Information can also be found in IGT's Annual Report on Form 10-K for the year ended September 29, 2012, filed with the SEC on November 28, 2012, and IGT's preliminary proxy statement, filed with the SEC on January 7, 2013. Stockholders will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by IGT with the SEC for no charge at the SEC's website at Copies will also be available at no charge at IGT's website at or by writing to IGT at 6355 South Buffalo Drive, Las Vegas, Nevada 89113, Attn: Corporate Secretary.About IGTInternational Game Technology (NYSE: IGT) is a global leader in the design, development and manufacture of gaming machines and systems products, as well as online and mobile gaming solutions for regulated markets. More information about IGT is available at or follow IGT on Twitter at @IGTNews or Facebook at STATEMENTS OF INCOME (Unaudited and Condensed)Quarters Ended December 31,20122011(In millions, except per share amounts)RevenuesGaming operations$                 242.6$          252.0Product sales234.8180.9Interactive52.912.6Total revenues530.3445.5Costs and operating expensesCost of gaming operations89.598.1Cost of product sales109.289.4Cost of interactive22.16.1Selling, general and administrative100.289.7Research and development54.446.9Depreciation and amortization19.015.4Contingent acquisition related costs17.5-Total costs and operating expenses411.9345.6Operating income118.499.9Other income (expense)Interest income11.312.0Interest expense(31.7)(30.0)Other  (0.3)(2.8)Total other income (expense)(20.7)(20.8)Income from continuing operations before tax 97.779.1Income tax provision 32.428.8Income from continuing operations65.350.3Loss from discontinued operations, net of tax-(1.0)Net income$                   65.3$             49.3Basic earnings (loss) per shareContinuing operations$                   0.25$             0.17Discontinued operations--Net income$                   0.25$             0.17Diluted earnings (loss) per shareContinuing operations$                   0.24$             0.17Discontinued operations-(0.01)Net income$                   0.24$             0.16Weighted average shares outstandingBasic265.9297.3Diluted 267.9299.0CONSOLIDATED BALANCE SHEET (Unaudited and Condensed) December 31,  September 30, 20122012(In millions)AssetsCurrent assetsCash and equivalents$    200.7$               206.3Restricted cash and investments76.381.9Jackpot annuity investments 59.660.2Receivables, net543.1564.8Inventories91.592.9Other assets and deferred costs207.7257.2  Total current assets1,178.91,263.3Property, plant and equipment, net545.7555.7Jackpot annuity investments 291.0295.7Contracts and notes receivable, net130.6139.3Goodwill and other intangibles, net1,648.51,663.1Other assets and deferred costs381.8368.0Total Assets$ 4,176.5$            4,285.1Liabilities and Shareholders' EquityCurrent liabilitiesAccounts payable$       80.2$                  87.5Jackpot liabilities, current portion141.5152.4Dividends payable18.616.0Other accrued liabilities  322.6374.4  Total current liabilities562.9630.3Long-term debt1,775.51,846.4Jackpot liabilities319.9328.6Other liabilities264.8282.0Total Liabilities2,923.13,087.3Total Equity1,253.41,197.8Total Liabilities and Shareholders' Equity$ 4,176.5$            4,285.1CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited and Condensed)Three Months EndedDecember 31,20122011(In millions)OperatingNet income$        65.3$        49.3Depreciation and amortization57.754.6Contingent earn-out consideration2.1-Other non-cash items30.523.2Changes in operating assets and liabilities, excluding acquisitions:Receivables14.430.2Inventories2.6(22.3)Accounts payable and accrued liabilities(83.5)(57.0)Jackpot liabilities(24.2)(5.9)Income taxes, net of employee stock plans28.8(8.8)Other assets and deferred costs0.81.5Net operating cash flows94.564.8InvestingCapital expenditures(37.6)(49.2)Jackpot annuity investments, net9.96.8Changes in restricted cash5.7(10.7)Loans receivable, net7.67.4Other4.617.0Net investing cash flows(9.8)(28.7)FinancingDebt related proceeds (payments), net(75.0)-Employee stock plan proceeds1.88.7Share repurchases and forward contracts-(4.4)Dividends paid(16.1)(17.8)Net financing cash flows(89.3)(13.5)Foreign exchange rates effect on cash (1.0)2.1Net change in cash and equivalents(5.6)24.7Beginning cash and equivalents206.3460.0Ending cash and equivalents$      200.7$      484.7SUPPLEMENTAL DATA (Unaudited)Revenue MetricsQuarters Ended December 31,20122011In millions, unless otherwise notedGaming OperationsRevenues$ 242.6$ 252.0North America208.6219.5International34.032.5Gross margin63%61%North America62%59%International69%74%Installed base ('000)56.855.6North America43.042.6International13.813.0Average revenue per unit per day (0.00)$46.80$50.58Product SalesRevenues$ 234.8$ 180.9North America158.9103.0International75.977.9Machines$ 157.5$ 115.7North America101.859.1International55.756.6Non-machine$   77.3$   65.2North America57.143.9International20.221.3Gross margin53%51%North America56%53%International48%48%Units recognized ('000)10.77.3North America7.23.8International3.53.5Units shipped ('000) [includes units where revenues deferred]9.36.5North America6.83.5New1.70.7Replacement5.12.8International2.53.0New0.81.3Replacement1.71.7Average machine sales price ('000)$   14.8$   15.9North America14.115.8International16.116.0InteractiveRevenues$   52.9$   12.6North America41.90.1International11.012.5Social41.3-North America41.3-International--IGTi11.612.6North America0.60.1International11.012.5Gross margin58%52%North America60%n/aInternational50%51%DoubleDown Casino®Average User Statistics*Daily active users (DAU) ('000)1,462Monthly active users (MAU) ('000)4,931Bookings per DAU (0.00)$   0.31*as a single application with multiple games, active users equal unique usersReconciliations of GAAP to Non-GAAP Adjusted Financial Measures (In millions, except EPS)First Quarter Ended December 31, 2012Continuing OperationsRevenueCost of RevenuesOperatingExpensesOperatingIncomeNetEarnings (a)DilutedEPSGAAP measures$ 530.3$ 220.8$ 191.1$ 118.4$ 65.3$0.24% of revenue36%22%Acquisition related charges:(b)Contingent retention & earn-out--(17.5)17.511.50.04Amortization of intangibles-(2.3)(4.4) settlement(5.0)--(5.0)(5.0)(0.02)Total non-GAAP adjustments(5.0)(2.3)(21.9) measures$ 525.3$ 218.5$ 169.2$ 137.6$ 76.2$0.28% of revenue32%26%(a)Adjustments tax effected at 34%, except no tax effect on royalty settlement(b) Primarily related to DoubleDown Adjusted EBITDA For The First Quarters Ended December 31,20122011GAAP Income from continuing operations$    65.3$    50.3Other (income) expense, net20.720.8Income tax provision32.428.8Depreciation and amortization57.754.6Other charges:Share-based compensation 8.68.2Contingent acquisition related costs17.5-Adjusted EBITDA $  202.2$  162.7Free Cash Flow For The Three Months Ended December 31,20122011GAAP net operating cash flows$    94.5$    64.8Investment in property, plant and equipment(7.3)(9.8)Investment in gaming operations equipment(30.1)(39.0)Investment in intellectual property(0.2)(0.4)Free Cash Flow (before dividends)56.915.6Dividends paid(16.1)(17.8)Free Cash Flow (after dividends)$    40.8$    (2.2)We believe that certain non-GAAP financial measures, when presented in conjunction with comparable GAAP (Generally Accepted Accounting Principles) measures, are useful because that information is an appropriate measure for evaluating our operating performance. Non-GAAP information is used to evaluate business performance and management's effectiveness. These measures should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Non-GAAP financial measures may not be calculated in the same manner by all companies and therefore may not be comparable. SOURCE International Game TechnologyFor further information: Matt Moyer, Vice President, IGT Investor Relations, +1 866-296-4232