International Game Technology Reports First Quarter Fiscal Year 2012 Results

LAS VEGAS, Jan. 24, 2012 /PRNewswire/ -- International Game Technology (NYSE: IGT) today reported operating results for the fiscal first quarter ended December 31, 2011. GAAP income from continuing operations for the quarter was $50 million, or $0.17 per share, compared to $73 million, or $0.25 per share, in the same quarter last year. The prior year's quarter was favorably impacted by $0.04 per share from certain discrete tax benefits and an investment gain. Adjusted income from continuing operations for the quarter was $50 million, or $0.17 per share, compared to $62 million, or $0.21 per share, in the same quarter last year.

"Our first quarter results – generating $100 million of operating income and over $160 million of Adjusted EBITDA – demonstrate the diversity we have built into our global business model and into our profitability. Our international business and gaming operations business continue to show strength and our cost controls remain tight," said Patti Hart, CEO of IGT. "We anticipate revenues and profit margins strengthening throughout the year and we remain on track to meet our fiscal year 2012 operating goals."

Adjusted income from continuing operations and Adjusted EBITDA are non-GAAP measures. GAAP to non-GAAP reconciliations are provided at the end of this release.

Consolidated Operations

Total revenues for the first quarter were $446 million, of which 59% was generated from gaming operations and 41% from product sales, compared to $451 million for the same quarter last year. The lower revenue was mainly due to fewer new casino openings in North America. Consolidated gross profit and operating income for the quarter were $252 million and $100 million, respectively, compared to $269 million and $120 million, respectively, in the prior year's first quarter. The decreases were primarily due to lower North America machine, part, and conversion sales.

Gaming Operations

First quarter revenues from gaming operations increased 5% to $265 million compared to $253 million for the same quarter last year, primarily due to increases in interactive, International lease operations and North America MegaJackpots®. Average revenue per unit per day in the first quarter was $53.11, up 1% over the prior year quarter. Sequentially, average revenue per unit decreased 9% primarily due to a higher mix of lower-yielding units.

Gaming operations gross profit totaled $160 million in the first quarter compared to $159 million for the same quarter last year. Gaming operations gross margin was 61% in the first quarter compared to 63% for the same quarter last year, primarily due to unfavorable interest rate changes on jackpot expense.

As of December 31, 2011, IGT's gaming operations install base grew to 55,600 units, up 3,000 over the prior year and 1,700 units from September 30, 2011. Increases in the install base were driven by an increase in North America lease operations, from the opening of Resorts World Casino New York City, and International lease operations in Latin America.

Product Sales

First quarter product sales revenues were $181 million, down 9% compared to the same quarter last year. The company recognized 7,300 units in the quarter, down 12% from last year's first quarter, primarily due to fewer new casino openings in North America.

Domestic average selling price increased 5% to $15,600 in the first quarter compared to the same quarter last year, mainly due to a higher mix of Universal Slant and G23 MLD sales. International average selling prices increased 20% to $16,200 for the first quarter, compared to the same quarter last year, primarily due to the prior year's conversion of lower-priced Mexico lease units to for-sale units.

Gross profit in the first quarter decreased to $92 million compared to $111 million for the same quarter last year, primarily due to lower North America machine, part, and conversion sales. Gross margin for the first quarter was 51% compared to 56% for the same quarter last year. The decrease in gross margin primarily resulted from a less favorable product mix.

Operating Expenses and Other Income/Expense

First quarter operating expenses increased to $152 million, or 34% of revenues compared to $149 million, or 33% of revenues in the prior year quarter. The increase was due to higher SG&A expenses, largely from the acquisition of Entraction, which was offset by lower depreciation and amortization, research and development and bad debt expense.

Other expense, net, in the first quarter totaled $21 million compared to $18 million in the prior year quarter, primarily attributable to the prior year investment gain.

Cash Flows, Balance Sheet and Capital Deployment

For the quarter ended December 31, 2011, IGT generated $65 million in cash from operations on net income of $49 million compared to $102 million in cash from operations on net income of $74 million in the prior year period.

Working capital increased to $926 million at December 31, 2011 compared to $875 million at September 30, 2011. As of December 31, 2011, cash equivalents and short-term investments (including restricted amounts) totaled $587 million and contractual debt obligations totaled $1.65 billion. As of December 31, 2011, there were no outstanding borrowings under the company's credit facility.

During the first quarter, the company repurchased 0.3 million shares of common stock at an average price of $16.74 per share for a total cost of $4 million. Since the share repurchase program was announced on June 8, 2011, the company has repurchased 3.4 million shares of common stock at an average price of $15.83 per share for a total cost of $54 million.

References to per share amounts in this release are based on diluted shares of common stock, unless otherwise specified.

Outlook

Based on current expectations and the operating results for the first quarter of fiscal 2012, the company is reiterating its fiscal year 2012 guidance for adjusted earnings from continuing operations of $0.93 to $1.03 per share.

Earnings Conference Call

As previously announced on Jan. 5, 2012, IGT will host a conference call to discuss its First Quarter Fiscal Year 2012 earnings results on Tuesday, Jan. 24, 2012, at 5:00 a.m. PST. The access numbers are as follows:

     Domestic callers dial +1 888-455-9723, passcode IGT
     International callers dial +1 212-547-0311, passcode IGT

The conference call will also be broadcast live over the Internet. A link to the webcast is available at the IGT website: http://www.IGT.com/InvestorRelations. The call will be archived until Wednesday, Feb. 1, 2012 at http://www.IGT.com/InvestorRelations, for those interested parties that are unable to participate during the live webcast.

A taped replay of the conference call will be available beginning at approximately 7:00 a.m. PST on Tuesday, Jan. 24, 2012. This replay will run through Wednesday, Feb. 1, 2012. The access numbers are as follows:

     Domestic callers dial +1 800-873-2151
     International callers dial +1 203-369-3570

Q1 FY 2012 Excel file

Q1 FY 2012 PDF of this press release

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This 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 2012) and our strategic and operational plans. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, general economic conditions and changes in economic conditions affecting the gaming industry; 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; changes in laws or regulations affecting our business; 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 the additional risks and uncertainties included 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 2011 filed with the SEC on November 30, 2011, and available on the SEC website at www.sec.gov and on the investor relations section of our website at www.IGT.com. Additional information will also be set forth in our Quarterly Report on Form 10-Q for our fiscal quarter ended December 31, 2011, which we expect to file with the SEC in the first quarter of calendar 2012. All information provided in this release is as of January 24, 2012, and IGT undertakes no duty to update this information.

About IGT
International 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 www.IGT.com or follow IGT on Twitter at @IGTNews or Facebook at www.facebook.com/IGT.

Additional Guidance Disclosure
In this release, we provide guidance on adjusted EPS from continuing operations for the 2012 fiscal year. At this time, we have not identified any specific adjustments to GAAP EPS from continuing operations for the 2012 fiscal year. Accordingly, we have not provided a reconciliation of GAAP EPS from continuing operations to adjusted EPS from continuing operations for the 2012 fiscal year. Adjustments to EPS from continuing operations are typically non-recurring or non-operating in nature. For historical examples of these adjustments, please refer to the reconciliation table of GAAP EPS from continuing operations to Adjusted EPS from continuing operations for the quarters ended December 31, 2011 and 2010.

Adjusted EPS from continuing operations for the fiscal year is a supplemental non-GAAP financial measure commonly used by management and industry analysts to evaluate our financial performance. Adjusted EPS from continuing operations should not be construed as an alternative to EPS from continuing operations as an indicator of our operating performance determined in accordance with generally accepted accounting principles. All companies do not calculate adjusted EPS from continuing operations in the same manner, and IGT's presentation may not be comparable to that of other companies. The guidance provided in this release is as of January 24, 2012, and IGT undertakes no duty to update this guidance.

SOURCE International Game Technology