INTERNATIONAL GAME TECHNOLOGY 
By LAS 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
$0.28
-- Sold 5,100 North America replacement units, up 82%
-- Social gaming revenues increased 15% sequentially from the fiscal fourth
quarter of 2012
International Game Technology (NYSE: IGT) today reported operating results for the first quarter ended December 31, 2012.
"Our robust first quarter results - 19% revenue growth and a 65% increase in adjusted earnings per share from continuing operations - provide a great start toward what we expect will be our fourth consecutive year of double digit growth in adjusted earnings per share from continuing operations," said Patti Hart, CEO of IGT. "We believe our strong performance demonstrates that our strategy is working and that IGT is moving in the right direction. Through the remainder of fiscal 2013, we intend to build on this momentum by leveraging our core business, distributing our best-in-class content more broadly, and returning capital to shareholders."
Consolidated Results
--------------------
($ in millions, except per
share amounts) First Quarters Ended
December 31,
------------
2012 2011 % Change
---- ---- --------
GAAP Measures
Revenue $530.3 $445.5 19%
Operating income $118.4 $99.9 19%
Income from continuing
operations $65.3 $50.3 30%
Earnings per share from
continuing operations $0.24 $0.17 41%
Net operating cash flows $94.5 $64.8 46%
Non-GAAP Measures
Adjusted operating income $137.6 $99.9 38%
Adjusted income from
continuing operations $76.2 $50.3 51%
Adjusted earnings per share
from continuing operations $0.28 $0.17 65%
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 Ended
December 31,
------------
2012 2011 % Change
---- ---- --------
Revenue $242.6 $252.0 -4%
Gross profit $153.1 $153.9 -1%
Gross margin 63% 61% 3%
Installed base 56,800 55,600 2%
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 Ended
December 31,
------------
2012 2011 % Change
---- ---- --------
Revenue $234.8 $180.9 30%
Gross profit $125.6 $91.5 37%
Gross margin 53% 51% 4%
Units recognized ('000) 10.7 7.3 47%
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 Ended
December 31,
------------
2012 2011 % Change
---- ---- --------
Revenue $52.9 $12.6 320%
Social
gaming $41.3 - *
IGTi $11.6 $12.6 -8%
Gross
Margin 58% 52% 12%
Social
gaming 60% - *
IGTi 51% 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 users
-- Social 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 Ended
December 31,
------------
2012 2011 % Change
---- ---- --------
Operating Expenses
------------------
Selling, general &
administrative $100.2 $89.7 12%
Research & development 54.4 46.9 16%
Depreciation &
amortization 19.0 15.4 23%
Contingent acquisition
related costs 17.5 - *
---- ---
Total operating
expenses $191.1 $152.0 26%
====== ======
Adjusted Operating
Expenses
------------------
Total $169.2 $152.0 11%
====== ======
Adjusted operating expenses is a non-
GAAP financial measure.
Reconciliations between GAAP and
non-GAAP measures are provided at
the end of this release. No
reconciliation for adjusted
operating expenses for the quarter
ended December 31, 2011 is provided
because no adjustments to GAAP
operating expenses were made, as
indicated in the table above.
-- First quarter operating expenses increased over the prior year quarter
primarily due to additional expenses from DoubleDown.
-- Adjusted operating expenses were 32% of revenues for the first quarter
compared to 34% of revenues in the prior year quarter.
Balance Sheet and Capital Deployment
------------------------------------
($
in
millions) December 31, September 30,
2012 2012 % Change
---- ---- --------
Cash
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.
Other
References 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.
Outlook
Based 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 Call
As 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: http://www.IGT.com/InvestorRelations. The call will be archived until Tuesday, Feb. 5, 2013 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 after the conference call. This replay will run through Tuesday, Feb. 5, 2013. The access numbers are as follows:
Domestic callers dial +1 866-489-8039
International callers dial +1 203-369-1674
Q1 FY 2013 Excel file
Q1 FY 2013 PDF of this press release
Forward-Looking Statements
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 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 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, 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 (www.igt.com) 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 www.sec.gov. Copies will also be available at no charge at IGT's website at www.igt.com or by writing to IGT at 6355 South Buffalo Drive, Las Vegas, Nevada 89113, Attn: Corporate Secretary.
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.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited and Condensed)
Quarters Ended
December 31,
---------------
2012 2011
---- ----
(In millions, except per share
amounts)
Revenues
Gaming operations $242.6 $252.0
Product sales 234.8 180.9
Interactive 52.9 12.6
---- ----
Total revenues 530.3 445.5
----- -----
Costs and operating expenses
Cost of gaming operations 89.5 98.1
Cost of product sales 109.2 89.4
Cost of interactive 22.1 6.1
Selling, general and administrative 100.2 89.7
Research and development 54.4 46.9
Depreciation and amortization 19.0 15.4
Contingent acquisition related costs 17.5 -
---- ---
Total costs and operating expenses 411.9 345.6
Operating income 118.4 99.9
----- ----
Other income (expense)
Interest income 11.3 12.0
Interest expense (31.7) (30.0)
Other (0.3) (2.8)
---- ----
Total other income (expense) (20.7) (20.8)
Income from continuing operations
before tax 97.7 79.1
Income tax provision 32.4 28.8
---- ----
Income from continuing operations 65.3 50.3
Loss from discontinued operations,
net of tax - (1.0)
--- ----
Net income $65.3 $49.3
===== =====
Basic earnings (loss) per share
Continuing operations $0.25 $0.17
Discontinued operations - -
--- ---
Net income $0.25 $0.17
===== =====
Diluted earnings (loss) per share
Continuing operations $0.24 $0.17
Discontinued operations - (0.01)
--- -----
Net income $0.24 $0.16
===== =====
Weighted average shares outstanding
Basic 265.9 297.3
Diluted 267.9 299.0
CONSOLIDATED BALANCE SHEET (Unaudited and Condensed)
December 31, September 30,
------------ -------------
2012 2012
---- ----
(In millions)
Assets
Current assets
Cash and equivalents $200.7 $206.3
Restricted cash and
investments 76.3 81.9
Jackpot annuity
investments 59.6 60.2
Receivables, net 543.1 564.8
Inventories 91.5 92.9
Other assets and
deferred costs 207.7 257.2
----- -----
Total current assets 1,178.9 1,263.3
Property, plant and
equipment, net 545.7 555.7
Jackpot annuity
investments 291.0 295.7
Contracts and notes
receivable, net 130.6 139.3
Goodwill and other
intangibles, net 1,648.5 1,663.1
Other assets and
deferred costs 381.8 368.0
----- -----
Total Assets $4,176.5 $4,285.1
======== ========
Liabilities and
Shareholders' Equity
Current liabilities
Accounts payable $80.2 $87.5
Jackpot liabilities,
current portion 141.5 152.4
Dividends payable 18.6 16.0
Other accrued
liabilities 322.6 374.4
----- -----
Total current
liabilities 562.9 630.3
Long-term debt 1,775.5 1,846.4
Jackpot liabilities 319.9 328.6
Other liabilities 264.8 282.0
----- -----
Total Liabilities 2,923.1 3,087.3
Total Equity 1,253.4 1,197.8
------- -------
Total Liabilities and
Shareholders' Equity $4,176.5 $4,285.1
======== ========
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited and Condensed)
Three Months Ended
December 31,
------------
2012 2011
---- ----
(In millions)
Operating
Net income $65.3 $49.3
Depreciation and amortization 57.7 54.6
Contingent earn-out consideration 2.1 -
Other non-cash items 30.5 23.2
Changes in operating assets and
liabilities, excluding acquisitions:
Receivables 14.4 30.2
Inventories 2.6 (22.3)
Accounts payable and accrued
liabilities (83.5) (57.0)
Jackpot liabilities (24.2) (5.9)
Income taxes, net of employee stock
plans 28.8 (8.8)
Other assets and deferred costs 0.8 1.5
--- ---
Net operating cash flows 94.5 64.8
---- ----
Investing
Capital expenditures (37.6) (49.2)
Jackpot annuity investments, net 9.9 6.8
Changes in restricted cash 5.7 (10.7)
Loans receivable, net 7.6 7.4
Other 4.6 17.0
--- ----
Net investing cash flows (9.8) (28.7)
---- -----
Financing
Debt related proceeds (payments), net (75.0) -
Employee stock plan proceeds 1.8 8.7
Share 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) 2.1
---- ---
Net change in cash and equivalents (5.6) 24.7
Beginning cash and equivalents 206.3 460.0
----- -----
Ending cash and equivalents $200.7 $484.7
====== ======
SUPPLEMENTAL DATA (Unaudited)
Revenue Metrics
Quarters Ended December 31, 2012 2011
--------------------------- ---- ----
In millions, unless otherwise noted
Gaming Operations
-----------------
Revenues $242.6 $252.0
North America 208.6 219.5
International 34.0 32.5
Gross margin 63% 61%
North America 62% 59%
International 69% 74%
Installed base ('000) 56.8 55.6
North America 43.0 42.6
International 13.8 13.0
Average revenue per unit per day (0.00) $46.80 $50.58
Product Sales
-------------
Revenues $234.8 $180.9
North America 158.9 103.0
International 75.9 77.9
Machines $157.5 $115.7
North America 101.8 59.1
International 55.7 56.6
Non-machine $77.3 $65.2
North America 57.1 43.9
International 20.2 21.3
Gross margin 53% 51%
North America 56% 53%
International 48% 48%
Units recognized ('000) 10.7 7.3
North America 7.2 3.8
International 3.5 3.5
Units shipped ('000) [includes units
where revenues deferred] 9.3 6.5
North America 6.8 3.5
New 1.7 0.7
Replacement 5.1 2.8
International 2.5 3.0
New 0.8 1.3
Replacement 1.7 1.7
Average machine sales price ('000) $14.8 $15.9
North America 14.1 15.8
International 16.1 16.0
Interactive
-----------
Revenues $52.9 $12.6
North America 41.9 0.1
International 11.0 12.5
Social 41.3 -
North America 41.3 -
International - -
IGTi 11.6 12.6
North America 0.6 0.1
International 11.0 12.5
Gross margin 58% 52%
North America 60% n/a
International 50% 51%
DoubleDown Casino(R)Average User Statistics*
Daily active users (DAU) ('000) 1,462
Monthly active users (MAU) ('000) 4,931
Bookings per DAU (0.00) $0.31
*as a single application with multiple games, active users equal unique users
Reconciliations of GAAP to Non-GAAP Adjusted Financial Measures
(In millions, except EPS)
First Quarter Ended December 31, 2012
-------------------------------------
Continuing
Operations
-----------
Revenue Cost of Operating Operating Net Diluted
Revenues Expenses Income Earnings (a) EPS
-------- ------ ------ --- ---
GAAP measures $530.3 $220.8 $191.1 $118.4 $65.3 $0.24
% of revenue 36% 22%
Acquisition related charges:(b)
Contingent retention & earn-out - - (17.5) 17.5 11.5 0.04
Amortization of intangibles - (2.3) (4.4) 6.7 4.4 0.02
Royalty settlement (5.0) - - (5.0) (5.0) (0.02)
Total non-GAAP adjustments (5.0) (2.3) (21.9) 19.2 10.9 0.04
Adjusted measures $525.3 $218.5 $169.2 $137.6 $76.2 $0.28
% of revenue 32% 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,
---------------------------------------------------------
2012 2011
---- ----
GAAP Income from continuing operations $65.3 $50.3
Other (income) expense, net 20.7 20.8
Income tax provision 32.4 28.8
Depreciation and amortization 57.7 54.6
Other charges:
Share-based compensation 8.6 8.2
Contingent acquisition related costs 17.5 -
---- ---
Adjusted EBITDA $202.2 $162.7
====== ======
Free Cash Flow For The Three Months Ended December 31,
------------------------------------------------------
2012 2011
---- ----
GAAP net operating cash flows $94.5 $64.8
Investment 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) 56.9 15.6
Dividends 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 Technology
