International Game Technology Reports First Quarter Fiscal Year 2006 Results
biz.yahoo.com
Thursday January 19, 7:30 am ET
RENO, Nev., Jan. 19 /PRNewswire-FirstCall/ -- International Game Technology (NYSE: IGT) today reported operating results for the first quarter ended December 31, 2005.
First quarter financial highlights:
* Record gaming operations installed base of 43,300 machines
* Gaming operations gross profit of $165.5 million, up $16.1 million
year-over-year
* Record non-machine related revenues totaling $93.0 million, up
$29.2 million year-over-year
* Strong international results, excluding Japan
* Cash flows provided by operating activities totaled $159.0 million
* Repurchased approximately 2.5 million shares for $73.1 million
* Quarterly dividend totaling $42.3 million
"While visibility to North America machine sales remains limited, we continue to effectively execute on our strategy to grow our international business, increase the installed base and efficiency of our gaming operations business, and expand the contribution from non-machine product sales," said IGT Chairman and CEO TJ Matthews. "Year-over-year, our installed base of recurring revenue machines increased 6,300 units, with growth in both the North America and international markets. Product sales were strong in several international markets, and we grew our non-machine related revenues 46% over the prior year."
For the first quarter of fiscal 2006, net income totaled $120.6 million or $0.34 per diluted share and included share-based compensation expense of $6.1 million, net of tax, or $0.02 per diluted share related to the required adoption of SFAS 123®. For the first quarter of fiscal 2005, net income totaled $122.4 million or $0.33 per diluted share and included share-based compensation of $0.7 million, net of tax, recognized under APB 25, the previous accounting standard for share-based compensation.
Gaming Operations
First quarter revenues and gross profit from gaming operations totaled $291.7 million and $165.5 million, respectively, compared to $286.9 million and $149.4 million in the prior year. In the first quarter, we increased the installed base of recurring revenue machines and experienced more favorable play levels in several markets. Gross profit margins for gaming operations increased five percentage points year-over-year due to effective cost management, positive shifts in interest rates, and a more favorable product mix in the installed base. The installed base included a greater mix of higher performing games and non-jackpot bearing games, such as multi-level progressives, central determination systems and lease operations.
The installed base ended the quarter at a record 43,300 units, an increase of 6,300 units from the prior year and an increase of 4,500 units from the immediately preceding quarter.
In the casino operations market, both year-over-year and sequential quarter growth were driven by additional placements in domestic markets that included California, Oklahoma, Washington, Florida and Alabama. Internationally, the casino operations market increased with the introduction of 300 wide-area progressive units in South Africa during the current quarter.
In the lease operations market, growth was the result of the placement of
2,700 units in Mexico, with 2,200 of the units placed during the current
quarter alone. In the preceding quarter, 500 units were placed in Mexico.
Year-over-year and sequential quarter growth was also realized in the domestic
lease operations market with incremental placements in New York and Rhode
Island.
Product Sales
IGT Product Sales Summary
Quarters Ended
December 31,
2005 2004
Revenues (in millions)
North America $206.7 $182.1
International 117.8 172.2
Total $324.5 $354.3
Gross Margin
North America 54% 55%
International 46% 37%
Total 51% 46%
Units Shipped
North America 14,300 14,700
International 14,800 40,600
Total 29,100 55,300
Average Revenue
Per Unit (ARPU)
North America $14,500 $12,400
International 7,900 4,200
Total 11,200 6,400
First quarter worldwide product sales revenues and gross profits totaled $324.5 million and $166.5 million, respectively, compared to $354.3 million and $163.6 million in the prior year. Non-machine related revenues grew to $93.0 million in the quarter compared to $63.8 million in the prior year, driven primarily by increased sales of gaming systems and game theme conversions. Consolidated gross margins in the current quarter were 51% versus 46% in the prior year, primarily due to a lower level of international sales and the growth of non-machine related sales that carry higher margins.
North America machine sales revenue remained flat compared to the prior year due to the maturation of the ticket-in, ticket-out replacement cycle. North America non-machine related revenues totaled $73.4 million, an increase of 46% from the prior year. North America gross profit margins totaled 54% and were consistent with the prior year.
International product sales revenues totaled $117.8 million in the first quarter compared to $172.2 million in the prior year. The current quarter did not include any material unit sales in Japan, while the prior year included the sale of 29,600 Terminator(TM) units. Excluding Japan, our international division achieved strong results, most notably Australia, Europe, the UK and Latin America. International gross profit margins were 46% compared to 37% due to a greater portion of casino market sales versus low-payout sales.
Operating Expenses and Other Income/Expense
In the current quarter, we adopted SFAS 123®, Share-Based Payment, which requires the measurement and recognition of share-based compensation in the financial statements. IGT elected to adopt SFAS 123® using the modified prospective method. Accordingly, IGT's consolidated financial statements for periods prior to fiscal 2006 will not be restated to reflect the impact of SFAS 123®. Prior to fiscal 2006, we accounted for share-based awards under the APB 25 intrinsic value method, which resulted in the recognition of compensation expense for restricted stock awards and the modification or acquisition of outstanding unvested options. Please refer to the table on page 12 for further detail on how the expense associated with SFAS 123® is reflected in our statement of income for the first quarter of fiscal 2006.
Total operating expenses were $146.2 million compared to $123.3 million in the prior year. Operating expenses increased primarily as a result of $9.0 million of share-based compensation expense related to the adoption of SFAS 123®, increased legal and compliance related professional services, additional investments in game development and the inclusion of WagerWorks. Please refer to the table on page 12 for more information on the impact of the adoption of SFAS 123®.
Other income, net, totaled $2.7 million compared to $1.6 million in the prior year, mostly due to higher investment yields.
Cash Flows & Balance Sheet
IGT generated $159.0 million in cash flow provided by operating activities on net income of $120.6 million. Working capital was $312.8 million at December 31, 2005 compared to $219.6 million at September 30, 2005.
Cash equivalents and short-term investments (inclusive of restricted amounts) totaled $726.3 million at December 31, 2005 compared to $688.1 million at September 30, 2005. Debt totaled $805.0 million at December 31, 2005 compared to $811.0 million at September 30, 2005.
On November 4, 2005, as a result of an earlier change in New Jersey gaming regulations, IGT assumed direct responsibility for progressive jackpot system operations, including the funding of future winner payments, which was previously under the control of a separate trust administrator. The administration of past winner payments continues to be the responsibility of the existing New Jersey trust administrator, and IGT is relieved of any related obligations. As a result of this change, IGT is no longer required to consolidate approximately $139.2 million in assets and liabilities related to past winners, and these amounts are not reflected in our balance sheet as of December 31, 2005.
Capital expenditures totaled $75.2 million compared to $44.4 million in the prior year. Consistent with the growth in our installed base, investments in gaming operations equipment drove higher capital expenditures year-over-year.
Capital Deployment
On December 8, 2005, our Board of Directors declared a quarterly cash dividend of $0.125 per share, payable on January 5, 2006 to shareholders of record on December 22, 2005.
IGT repurchased 2.5 million shares of common stock for an aggregate cost of $73.1 million during the first quarter. The remaining authorization under the Company's stock repurchase program totaled 20.6 million shares at December 31, 2005. |
