International Game Technology Reports Fourth Quarter and Fiscal Year 2006 Results
biz.yahoo.com
Tuesday November 7, 7:30 am ET
RENO, Nev., Nov. 7 /PRNewswire-FirstCall/ -- International Game Technology (NYSE: IGT) announced today operating results for the fourth quarter and fiscal year ended September 30, 2006.
Fourth quarter net income totaled $114.9 million or $0.33 per diluted share versus $105.4 million or $0.30 per diluted share in the same quarter last year. The fourth quarter was negatively impacted by certain items totaling $5.5 million, after tax, ($0.02 per diluted share) as detailed in operating expenses later. The prior year fourth quarter was negatively impacted $9.5 million, after tax, ($0.03 per diluted share) due to the Gulf Coast hurricanes.
Net income for the fiscal year ended September 30, 2006 increased to $473.6 million or $1.34 per diluted share compared to $436.5 million or $1.20 per diluted share in the prior year.
Fourth quarter financial highlights:
* Total revenues of $638.7 million, up 5%, and record total gross profit
up 21% over the prior year
* Record gaming operations revenues of $333.8 million, up 9%, and gross
profit up 28%
* Product sales revenues of $304.9 million, up 2%
* Record non-machine revenues of $93.5 million, up 11%
* Fully diluted earnings per share of $0.33, up 10%
Fiscal year financial highlights:
* Record total revenues of $2.5 billion, up 6%, and record related gross
profit up 15% from the prior year
* Product sales revenues of $1.3 billion, up 7%
* Record non-machine related revenues of $363.5 million, up 16%
* Record gaming operations revenues of $1.2 billion, up 4%, and record
related gross profit up 19%
* Record Adjusted EBITDA totaling $997.5 million, up 12%
* Fully diluted earnings per share of $1.34, up 12%
"Strong fourth quarter results capped off a successful year for IGT, led by record revenue and gross profit in gaming operations and 16% year-over-year growth in non-machine sales," said Chairman and CEO TJ Matthews. "Our margins expanded, Adjusted EBITDA reached a record of just under $1.0 billion, and we returned nearly $600 million to shareholders in the form of stock repurchase and dividends in fiscal 2006. Our ability to thrive in spite of a sluggish year for new or expanding domestic markets is the result of our industry- leading product development, expansion in non-traditional and international markets, and the commitment of our 5,200 employees worldwide."
Gaming Operations
Fourth quarter revenues and gross profit from gaming operations reached a record $333.8 million and $197.0 million, respectively, compared to $307.6 million and $154.3 million in the prior year quarter. For the fiscal year ended September 30, 2006, record revenues and gross profit from gaming operations grew $52.9 million and $115.9 million, respectively, from the prior year.
Fourth quarter gaming operations gross margins grew to 59% compared to 50% in the prior year. Margins in the prior year quarter were negatively impacted by asset obsolescence charges of $18.1 million. On an adjusted basis, current year margins improved primarily as a result of decreased jackpot expense and the continued success of our low-denomination and multi-level progressive games. Gross margins for the full year were 58% versus 51% in the prior year.
The installed base of recurring revenue machines ended the quarter and the year at a record 49,600 units, an increase of 10,800 units from the prior year and 3,400 units from the immediately preceding quarter. Year-over-year growth was primarily the result of incremental lease operations placements in Mexico, New York and Delaware, and incremental casino operations placements in Oklahoma, California, Alabama and Florida. Sequential installed base growth occurred primarily in the lease operations markets of Mexico, Delaware and New York, and the casino operations markets of Oklahoma and California.
Product Sales
Quarters Ended Years Ended
September 30 September 30
2006 2005 2006 2005
Revenues (in millions)
North America $209.1 $160.3 $804.4 $708.9
International 95.8 139.7 455.9 472.0
Total $304.9 $300.0 $1,260.3 $1,180.9
Gross Margin
North America 57% 52% 55% 54%
International 42% 41% 44% 42%
Total 52% 47% 51% 49%
Units Shipped
North America 11,700 10,200 51,100 50,500
International 10,700 29,700 60,900 91,400
Total 22,400 39,900 112,000 141,900
Fourth quarter worldwide product sales revenues and gross profits totaled $304.9 million and $160.0 million, respectively, compared to $300.0 million and $141.4 million in the prior year. Record non-machine revenues of $93.5 million increased 11% from the prior year and comprised 31% of total product sales revenues. Consolidated gross margins in the current quarter were 52% versus 47% in the prior year, primarily due to a greater mix of non-machine sales and a lower mix of international machine sales.
Worldwide product sales revenues and gross profits for the fiscal year ended September 30, 2006 totaled $1.3 billion and $641.7 million, respectively, compared to $1.2 billion and $576.6 million in the prior year. Record non-machine revenues increased 16% to $363.5 million for the full year and comprised 29% of total product sales revenues. Non-machine revenue growth was driven primarily by higher gaming systems, parts and game theme conversion sales.
North America product sales for the fourth quarter improved 30% compared to the prior year. Machine shipments increased 15% over the prior year primarily due to reconstruction efforts in the Gulf Coast region. North America non-machine revenues totaled $75.6 million, up 11% from the prior year quarter. North America gross margins increased to 57% compared to 52% in the prior year quarter, mainly due to a stronger product mix.
North America product sales revenue for the full year increased 13% on flat unit volumes. Non-machine revenues totaled $283.2 million, up 12% from the prior year. North America gross margins were 55% compared to 54% in the prior year. Revenue growth was driven by a more favorable mix of our AVP® TrimLine(TM) machines and increased non-machine revenues.
Fourth quarter international product sales totaled $95.8 million compared to $139.7 million in the prior year. The prior year included the sale of 18,500 Regulation 4 units in Japan versus 1,900 Regulation 5 units in the current year. Lower volumes in Japan were the result of the current market transition from Regulation 4 games to more restrictive Regulation 5 games. Current quarter international gross margins were 42% compared to 41% in the prior year.
International product sales revenue for the full year totaled $455.9 million compared to $472.0 million in the prior year. Lower shipments into Japan were partially offset by increased volumes in the UK, Australia, Asia and Latin America. International non-machine revenues increased 32% to $80.3 million. International gross margins improved to 44% over 42% in the prior year, mostly due to the lighter mix of lower margin Japan sales and a greater contribution from non-machine revenues.
Operating Expenses and Other Income/Expense
Operating expenses totaled $182.0 million for the quarter and $646.6 million for the fiscal year ended September 30, 2006 compared to $135.3 million and $527.0 million in the prior year periods, respectively. Operating expenses increased primarily as a result of additional share-based compensation related to the adoption of SFAS 123R, increased legal and compliance fees, greater investment in systems and game development, and the addition of WagerWorks. Operating expenses included share-based compensation during the current quarter and fiscal year of $10.8 million and $35.3 million, respectively.
Certain items affecting comparability in the current quarter included research and development charges of $11.3 million ($7.2 million after tax) related to the buyout of a third party development contract, a legal settlement gain included in other income of $3.9 million ($2.4 million after tax), gain on the sale of our Rapid City, South Dakota facility totaling $2.1 million ($1.3 million after tax), and $2.0 million in unfavorable one-time adjustments to our tax provision.
Cash Flows & Balance Sheet
IGT generated $624.1 million in operating cash flow on net income of $473.6 million. Operating cash flow decreased 14% from the prior year primarily due to increased receivables, additional prepayments to secure long- term licensing rights, the timing of income tax payments and the current year classification of excess tax benefits from employee stock plans in financing cash flows as a result of SFAS 123R accounting changes. Current year capital expenditures totaled $310.5 million compared to $238.6 million in the prior year, with the increase primarily due to the construction of our Las Vegas campus and growth in our gaming operations installed base.
Working capital totaled $170.9 million at September 30, 2006 compared to $219.6 million at September 30, 2005. Our zero coupon convertible debentures are classified as current liabilities and included in working capital because the market price condition for convertibility is currently satisfied.
Cash equivalents and short-term investments (inclusive of restricted amounts) totaled $589.1 million at September 30, 2006 compared to $688.1 million at September 30, 2005. Debt totaled $832.4 million at September 30, 2006 compared to $811.0 million at September 30, 2005.
Capital Deployment
On September 26, 2006, our Board of Directors declared a quarterly cash dividend of thirteen cents ($0.13) per share, which was paid on October 23, 2006 to shareholders of record on October 9, 2006. The dividend was increased from twelve and one-half cents ($0.125) per share in the previous quarter.
IGT repurchased 11.7 million shares in fiscal 2006 for an aggregate cost of $426.7 million. The remaining authorization under the Company's stock repurchase program totaled 11.4 million shares at September 30, 2006. |
