RENO, Nov. 10 /PRNewswire-FirstCall/ -- International Game Technology
(NYSE: IGT) today reported operating results for the fourth quarter and fiscal
year ended September 30, 2005.
Fourth quarter income from continuing operations totaled $105.4 million or
$0.30 per diluted share compared to $54.3 million or $0.15 in the prior year.
Fiscal year 2005 income from continuing operations totaled $436.5 million or
$1.20 per diluted share compared to $429.8 million or $1.17 per diluted share
in fiscal 2004.
The closure of Gulf Coast area casinos in the wake of Hurricanes Katrina
and Rita negatively impacted operating income results by approximately
$14.9 million, pre-tax, comprised of a $9.4 million reduction in gross profit
due to lost business activity, $2.8 million in asset-related charges and
$2.7 million in additional operating expenses for the fourth quarter. These
items reduced earnings per diluted share by approximately $0.026.
Prior year results included a significant charge of $77.0 million, net of
taxes, for the early redemption of the Company's senior notes in the fourth
quarter and favorable tax adjustments related to the utilization of foreign
income tax credits totaling $3.6 million in the fourth quarter and
$13.9 million for the full year.
"Although the Company faced difficult domestic marketplace conditions, IGT
delivered meaningful accomplishments this year," said IGT Chairman and CEO TJ
Matthews. "We generated record cash flow from operations and returned
$520.6 million to shareholders in the form of share repurchases and dividends.
We achieved record gaming operations, revenues and our international
operations delivered another record-breaking year in terms of revenues,
operating income and machine shipments. IGT successfully introduced
competitive new penny-denominated and multi-level progressive products that
have generated a strong order backlog. During the year, we entered several
new domestic and international markets with our central determination systems
and games, and our server-based gaming initiatives continue to progress. We
gained access to new distribution channels for our game content through the
acquisition of WagerWorks and entered into an alliance with Progressive Gaming
International and Shuffle Master to further extend our product offerings into
the table games area of the casino."
Gaming Operations
Fourth quarter revenues and gross profit from gaming operations totaled
$307.6 million and $154.3 million, respectively, compared to $308.8 million
and $160.5 million in the prior year. Gross profit margins for gaming
operations were 50% versus 52% in the prior year primarily due to
approximately $18.1 million in fixed asset salvage value adjustments to align
the value of our asset base with our current product plan.
For the year, gaming operations revenues reached a record $1.20 billion
compared to $1.16 billion in the prior year despite the interruption of Gulf
Coast business activities and an additional week in the prior fiscal year due
to our 52/53-week fiscal years. Gross profit margins for gaming operations
were 51% compared to prior year margins of 54%. The decline in gaming
operations margins was the result of technical obsolescence charges, changes
in fixed asset salvage value estimates, and the consolidation of our variable
interest entities that commenced in the third quarter of the prior year.
Our installed base of recurring revenue machines ended the quarter at
38,800 units, an increase of 1,600 units from the end of last year and an
increase of 300 units from the immediately preceding quarter. The year-over-
year growth was primarily driven by additional placements in casino operations
markets that included Alabama, California, Florida and Washington. We also
gained incremental placements in our domestic lease operations installed base
in New York, Rhode Island and Delaware due to performance-based reallocations
of market share, and in our international lease operations installed base with
the initial placement of 500 units in Mexico. Sequential installed base
growth was partially offset by the removal of 742 games from the Gulf Coast
region that were either destroyed or rendered inoperable as a result of the
damage caused by the hurricanes.
Product Sales
IGT Product Sales Summary
Quarters Ended Years Ended
September 30 September 30
2005 2004 2005 2004
Revenues (in millions)
North America $160.3 $235.4 $708.9 $991.1
International 139.7 77.5 472.0 330.3
Total $300.0 $312.9 $1,180.9 $1,321.4
Gross Margin
North America 52% 53% 54% 54%
International 41% 46% 42% 46%
Total 47% 51% 49% 52%
Units Shipped
North America 10,200 20,200 50,500 92,500
International 29,700 12,300 91,400 66,700
Total 39,900 32,500 141,900 159,200
Average Revenue
Per Unit (ARPU)
North America $15,800 $11,700 $14,000 $10,700
International 4,700 6,300 5,200 5,000
Total 7,500 9,600 8,300 8,300
Fourth quarter worldwide product sales revenues and gross profits totaled
$300.0 million and $141.4 million, respectively, compared to $312.9 million
and $160.4 million in the prior year. Non-machine related revenues, such as
systems sales and game theme conversions, grew to $84.3 million in the quarter
compared to $70.8 million in the prior year. Consolidated gross margins in
the current quarter were 47% versus 51% in the prior year, primarily due to a
larger mix of international sales.
Domestically, a greater mix of non-machine related revenues, along with
stronger pricing, helped maintain North American margins and improve average
revenue per unit.
International product sales revenues totaled $139.7 million in the fourth
quarter, an increase of 80% over the prior year. Higher international
revenues were primarily driven by the sale of 18,500 units in Japan during the
quarter following the release of Winning Post(TM). Additionally, we realized
revenue growth of 56% in Australia primarily as a result of a stronger product
mix that included new premium and linked products. International gross profit
margins were 41% compared to 46% in the prior year due to the heavy volume of
lower margin pachisuro machine sales in Japan.
For the year, worldwide product sales revenues and gross profit totaled
$1.18 billion and $576.6 million, respectively, compared to $1.32 billion and
$690.2 million in the prior year. Consolidated non-machine related revenues
grew to $313.0 million in fiscal 2005 compared to $256.0 million in fiscal
2004, driven by an increase in systems and game theme conversion sales. The
decline in total revenues was primarily the result of lower domestic
replacement volumes. However, our international division delivered strong
results driven by record-breaking performances for nearly all of our
international subsidiaries, particularly Japan, Australia and Latin America.
Consolidated product sales gross margins were 49% versus 52% in the prior
year, primarily due to the growth in pachisuro machine sales in Japan during
the current year.
Operating Expenses and Other Income/Expense
Total operating expenses were $135.3 million for the quarter and
$526.9 million for fiscal 2005 compared to $125.8 million and $504.9 million,
respectively, in the same prior-year periods. For the year, selling, general
and administrative costs increased primarily as a result of higher legal and
compliance fees, and $10.0 million in additional costs as a result of
reorganization efforts that were undertaken to move IGT closer to its customer
base and to further enhance market responsiveness. Research and development
costs increased with continued investments in game development and
approximately $1.3 million in purchased-in-process research and development
costs associated with the WagerWorks acquisition. Bad debt expense was lower
in the current year as a result of a more favorable risk profile on
outstanding receivables and lower domestic sales.
Other income, net, totaled $3.5 million for the quarter and $17.6 million
for fiscal 2005 compared to other expense, net, of $116.6 million and
$160.9 million, respectively, in the same prior-year periods. Significant
charges for the redemption of outstanding senior notes in the prior year and
the subsequent reduction to interest expense were the primary factors in the
favorable shift. Additionally, interest income in the current year included
$10.2 million in financing fees realized on early customer loan repayments.
Cash Flows & Balance Sheet
IGT generated $726.4 million in cash flows provided by operating
activities on net income of $436.5 million in fiscal 2005, an increase of 16%
from prior year cash flows. Working capital was $219.6 million at
September 30, 2005 compared to $949.7 million at September 30, 2004. The
change in working capital was primarily the result of the reclassification of
our convertible debentures from long-term to current liabilities in the second
quarter of fiscal 2005.
Cash equivalents and short-term investments (inclusive of restricted
amounts) totaled $688.1 million at September 30, 2005 compared to
$766.6 million at September 30, 2004. Debt totaled $811.1 million at
September 30, 2005 compared to $792.0 million at September 30, 2004.
Capital expenditures totaled $238.6 million in fiscal 2005 compared to
$210.9 million in the prior year. Fiscal 2005 included additional investments
in gaming operations equipment and construction costs related to the expansion
of the Reno facility and the development of the Las Vegas campus.
Capital Deployment
On September 27, 2005, our Board of Directors declared a quarterly cash
dividend of $0.125 per share payable on October 25, 2005 to shareholders of
record on October 11, 2005. During fiscal 2005, IGT returned $165.8 million
to shareholders in the form of dividends.
IGT repurchased 5.7 million shares of common stock for an aggregate cost
of $154.7 million during the fourth quarter. For the full year, IGT
repurchased 12.8 million shares for an aggregate cost of $354.7 million. The
remaining authorization under the Company's stock repurchase program totaled
23.1 million shares at September 30, 2005.
Credit Facility
IGT plans to amend and restate its existing $1.5 billion credit facilities
with a $2.0 billion five-year revolving credit facility. In addition,
pursuant to the proposed terms of the credit facility, IGT will have the right
to accept incremental commitments to increase the revolving credit facility by
up to an additional $500.0 million. IGT's ability to complete the new credit
facility and the ultimate size of this facility is subject to market and
customary closing conditions. The new credit facility is expected to close on
or before December 31, 2005.
As previously announced on October 21, 2005, International Game Technology
(NYSE: "IGT") will host a conference call regarding its Fourth Quarter &
Fiscal Year 2005 earnings release on Thursday, November 10, 2005 at 6:00 a.m.
(Pacific Standard Time) with TJ Matthews, Chairman of the Board, and Maureen
T. Mullarkey, Chief Financial Officer, International Game Technology. The
access numbers are as follows:
Domestic callers dial 888-889-4951, 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 can be obtained by visiting our website at
http://www.IGT.com/InvestorRelations. Minimum requirements to listen to the
broadcast include Windows Media Player and at least a 28.8Kbps connection to
the Internet. If you are unable to participate during the live webcast, the
call will be archived at http://www.IGT.com/InvestorRelations until Friday,
November 18, 2005.
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, November 10, 2005. This replay will run
through Friday, November 18, 2005. The access numbers are as follows:
Domestic callers dial 800-964-3639
International callers dial 203-369-3688
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 successfully introduced competitive new penny-denominated and
multi-level progressive products that have generated a strong order
backlog
* Server-based gaming initiatives continue to progress
* We gained access to new distribution channels for our game content
through the acquisition of WagerWorks and entered into an alliance
with Progressive Gaming International and Shuffle Master to further
extend our product offerings into the table games area of the casino
Although we believe that the expectations reflected in any of our forward
looking statements are reasonable, actual results could differ materially from
those projected or assumed. 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, changes in demand for IGT's
products because of a reduction in the growth of markets or changes in the
popularity of our products, the continuing or lingering impact of terrorist-
related events on play per game and capital equipment purchases by casinos
across our jurisdictions, a change in the appeal of Ticket-In, Ticket-Out
technology, a reduction in the pace of the replacement of machines, a decrease
in the popularity of our recurring revenue games, the risks of conducting
international operations, the adoption of new unfavorable gaming laws or laws
applicable to gaming machine manufacturers, and the uncertainties generally
associated with the development, manufacture and sales of gaming machines and
systems. 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.
IGT Fourth Quarter Fiscal Year 2005
Unaudited Condensed Consolidated Statements of Income
Quarters Ended Fiscal Years Ended
September 30, September 30,
2005 2004 2005 2004
(In thousands, except
per share amounts)
Revenues
Product sales $300,017 $312,917 $1,180,897 $1,321,336
Gaming operations 307,591 308,803 1,198,477 1,163,416
Total revenues 607,608 621,720 2,379,374 2,484,752
Costs and operating
expenses
Cost of product sales 158,651 152,559 604,342 631,161
Cost of gaming
operations 153,275 148,344 584,437 534,342
Selling, general and
administrative 81,989 72,988 318,532 293,144
Depreciation and
amortization 19,120 17,174 69,875 64,333
Research and
development 34,609 33,537 138,437 129,273
Provision for bad debts (392) 2,131 96 18,175
Total costs and
operating expenses 447,252 426,733 1,715,719 1,670,428
Operating income 160,356 194,987 663,655 814,324
Other income
(expense), net 3,452 (116,601) 17,610 (160,908)
Income from continuing
operations before tax 163,808 78,386 681,265 653,416
Provision for income
taxes 58,384 24,077 244,726 223,663
Income from continuing
operations 105,424 54,309 436,539 429,753
Discontinued operations,
net of tax -- -- -- 58,924
Net income $105,424 $54,309 $436,539 $488,677
Basic earnings per share
Continuing operations $0.31 $0.16 $1.27 $1.24
Discontinued operations -- -- -- 0.17
Net income $0.31 $0.16 $1.27 $1.41
Diluted earnings per share
Continuing operations $0.30 $0.15 $1.20 $1.17
Discontinued operations -- -- -- 0.15
Net income $0.30 $0.15 $1.20 $1.32
Weighted average shares
outstanding
Basic 340,272 346,392 343,688 346,785
Diluted 365,431 374,453 370,235 376,315
IGT Fourth Quarter Fiscal Year 2005
Unaudited Condensed Consolidated Balance Sheets
September 30, September 30,
2005 2004
(In thousands)
Assets
Current assets
Cash and equivalents $288,870 $306,980
Investment securities, at market value 268,336 316,976
Restricted cash and investments 130,932 142,667
Receivables, net 425,999 414,916
Inventories 142,287 165,601
Other 180,792 162,564
Total current assets 1,437,216 1,509,704
Long-term notes and contracts
receivable, net 49,343 87,284
Property, plant and equipment, net 385,192 329,058
Investments to fund jackpots 469,363 468,238
Goodwill and intangibles, net 1,377,221 1,293,758
Other assets 146,109 184,922
Total assets $3,864,444 $3,872,964
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term
notes payable $611,040 $103
Accounts payable 96,737 85,692
Jackpot liabilities 203,928 209,205
Accrued income taxes 14,490 7,537
Dividends payable 42,593 41,531
Other 248,867 215,941
Total current liabilities 1,217,655 560,009
Long-term notes payable, net of
current maturities 200,017 791,848
Long-term jackpot liabilities 501,880 510,057
Other liabilities 39,249 34,401
Total liabilities 1,958,801 1,896,315
Total stockholders' equity 1,905,643 1,976,649
Total liabilities and
stockholders' equity $3,864,444 $3,872,964
IGT Fourth Quarter Fiscal Year 2005
Unaudited Condensed Consolidated Statements of Cash Flows
Twelve Months Ended
September 30, September 30,
2005 2004
(In thousands)
Operations
Net income $436,539 $488,677
Gain on sale of discontinued operations -- (90,819)
Depreciation, amortization and other
non-cash items 260,293 326,003
Changes in operating assets and
liabilities:
Receivables 3,903 21,882
Inventories (10,166) (22,923)
Prepaid and other assets 24,038 (79,546)
Income taxes payable and deferred 25,239 39,645
Accounts payable and accrued liabilities 27,556 (30,706)
Jackpot liabilities (41,007) (28,629)
Net cash from operations 726,395 623,584
Investing
Capital expenditures (238,643) (210,888)
Restricted cash 11,355 4,561
Investment securities proceeds, net 49,729 458,527
Jackpot funding proceeds, net 28,053 26,561
Proceeds from sale of discontinued
operations -- 151,548
Acquisition of businesses (90,642) (109,717)
Other investing activities 24,283 44,229
Net cash (used for) from investing (215,865) 364,821
Financing
Debt proceeds (repayments), net 9,389 (905,333)
Dividends paid (165,826) (138,922)
Share repurchases (354,731) (129,678)
Other financing activities (14,414) 52,179
Net cash used for financing (525,582) (1,121,754)
Effect of foreign exchange rates on cash (3,058) (81)
Net change in cash and equivalents (18,110) (133,430)
Beginning cash and equivalents 306,980 440,410
Ending cash and equivalents $288,870 $306,980
IGT Fourth Quarter Fiscal Year 2005
Unaudited Supplemental Data
Calculation of Earnings Quarters Ended Fiscal Years Ended
Per Share from September 30, September 30,
Continuing Operations 2005 2004 2005 2004
(In thousands, except
per share amounts)
Income from continuing
operations $105,424 $54,309 $436,539 $429,753
Interest expense on
convertible debentures,
net of tax 2,386 2,340 9,509 9,363
Diluted EPS
Numerator $107,810 $56,649 $446,048 $439,116
Basic weighted average
common shares
outstanding 340,272 346,392 343,688 346,785
Dilutive effect of
stock options 4,628 7,530 6,016 8,999
Dilutive effect of
convertible debentures 20,531 20,531 20,531 20,531
Diluted EPS
Denominator 365,431 374,453 370,235 376,315
Basic earnings per share $0.31 $0.16 $1.27 $1.24
Diluted earnings per share $0.30 $0.15 $1.20 $1.17
Quarters Ended Fiscal Years Ended
Reconciliation of September 30, September 30,
Net Income to EBITDA 2005 2004 2005 2004
(In thousands)
Net income $105,424 $54,309 $436,539 $488,677
Discontinued operations,
net of tax -- -- -- (58,924)
Provision for income
taxes 58,384 24,077 244,726 223,663
Other (income)
expense, net (3,452) 116,601 (17,610) 160,908
Depreciation and
amortization 72,658 32,030 225,848 151,779
EBITDA $233,014 $227,017 $889,503 $966,103
EBITDA [earnings before interest, taxes, depreciation and amortization
(including asset charges and stock-based compensation), other expense,
net, and discontinued operations] is a supplemental non-GAAP financial
measure commonly used by management and industry analysts to evaluate our
financial performance. EBITDA provides useful information to investors
regarding our ability to service debt. 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 EBITDA in the same manner and IGT's
presentation may not be comparable to those presented by other companies.
IGT Fourth Quarter Fiscal Year 2005
Unaudited Supplemental Data
Fiscal Years Ended
September 30,
Calculation of Free Cash Flow 2005 2004
(In thousands)
Net cash from operations $726,395 $623,584
Investment in property, plant and equipment (48,477) (48,916)
Investment in gaming operations equipment (170,915) (132,318)
Investment in intellectual property (19,251) (29,654)
Subtotal 487,752 412,696
Dividends paid (165,826) (138,922)
Free Cash Flow $321,926 $273,774
Free cash flow is a supplemental non-GAAP financial measure commonly used
by management and 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.
SOURCE International Game Technology
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Related links:
http://www.igt.com
CONTACT:
Patrick Cavanaugh, Director of Investor
Relations, International Game Technology, +1-866-296-4232
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