INTERNATIONAL GAME TECHNOLOGY 
By LAS VEGAS, Jan. 23, 2014 /PRNewswire/ -- International Game Technology (NYSE: IGT) today reported operating results for the first quarter ended December 31, 2013.
(Logo: http://photos.prnewswire.com/prnh/20131003/LA91408LOGO)
"In our fiscal first quarter we expanded revenue while maintaining strong operating income and cash flows despite market challenges," said Patti Hart, CEO of IGT. "We remain confident that our focus on content, distribution and maximizing shareholder value while improving efficiencies will position us for success in fiscal 2014."
Consolidated Results
--------------------
First Quarters Ended December
31, 2013 2012 % Change
----------------------------- ---- ---- --------
(In millions, except per share
amounts)
GAAP Measures
Revenue $541.2 $530.3 2%
Operating income 103.7 118.4 -12%
Net income 79.2 65.3 21%
Earnings per share $0.31 $0.24 29%
Net operating cash flows $76.1 $94.5 -19%
Non-GAAP Measures
Adjusted operating income $123.8 $137.6 -10%
Adjusted net income 62.9 76.2 -17%
Adjusted earnings per share $0.25 $0.28 -11%
Free cash flow (before
dividends) $51.5 $56.9 -9%
Adjusted operating income,
adjusted net income, adjusted
earnings per share and free
cash flow are non-GAAP
financial measures.
Reconciliations between GAAP
and non-GAAP measures are
provided at the end of this
release.
-- Revenues increased 2% to $541 million, primarily driven by North America
growth in social gaming and machine sales.
-- GAAP earnings per share increased 29% to $0.31.
-- Adjusted earnings per share decreased 11% to $0.25.
Gaming Operations
-----------------
First Quarters Ended
December 31, 2013 2012 % Change
-------------------- ---- ---- --------
(In millions, unless
otherwise noted)
Revenue $223.0 $242.6 -8%
Gross profit 136.2 153.1 -11%
Gross margin 61% 63% -3%
Installed base ('000) 54.3 56.8 -4%
Yield (average revenue
per unit per day -
$0.00) $44.99 $46.80 -4%
-- Revenues decreased 8% to $223 million in the first quarter primarily due
to lower North America MegaJackpots® revenue.
-- Gross margin decreased to 61% from 63% compared to the prior year
quarter, primarily due to lower yield.
-- Installed base decreased driven by a decline in North America
MegaJackpots® and International lease operations units.
-- Average revenue per unit per day in the quarter was $44.99, down 4% over
the prior year quarter primarily due to lower MegaJackpots® yields and
down 8% sequentially in-line with seasonal trends.
Product Sales
-------------
First Quarters Ended
December 31, 2013 2012 % Change
-------------------- ---- ---- --------
(In millions, unless
otherwise noted)
Revenue $243.6 $234.8 4%
Gross profit 126.9 125.6 1%
Gross margin 52% 53% -3%
Machine units recognized
('000) 12.8 10.7 20%
Machine average sales
price ('000) $13.2 $14.8 -11%
-- Revenues increased 4% to $244 million in the first quarter, due to
increased North America machine sales largely related to video poker
sales.
-- Gross margin decreased to 52% from 53%, as the first quarter of 2013
benefited from a $5.0 million royalty settlement fee.
-- Average machine sales prices declined to $13,200 in the first quarter
primarily due to a higher mix of video poker unit sales to Caesar's
Entertainment, as well as some foreign currency pressures.
Interactive
-----------
First Quarters Ended December
31, 2013 2012 % Change
----------------------------- ---- ---- --------
(In millions, unless otherwise noted)
Revenue $74.6 $52.9 41%
Social gaming 64.8 41.3 57%
IGTi 9.8 11.6 -16%
Gross Margin 63% 58% 9%
Social gaming 62% 60% 3%
IGTi 64% 51% 25%
DoubleDown average user statistics*
DAU (Daily active users)
('000) 1,716 1,462 17%
MAU (Monthly active users)
('000) 6,198 4,931 26%
Bookings per DAU ($0.00) $0.42 $0.31 35%
*as a single application with multiple games, active users equal unique
users
-- Social gaming revenues increased 57% to $65 million in the first quarter
compared to the prior year quarter and increased 6% sequentially,
primarily driven by an increase in both average DAU and bookings per
DAU.
-- Average DAU were 1.7 million, an increase of 17% over the prior year
quarter.
-- Average MAU were 6.2 million, an increase of 26% compared to the prior
year quarter.
-- Average bookings per DAU was $0.42, an increase of 35% over the same
quarter last year.
-- DoubleDown was GAAP accretive in the first quarter of 2014.
Operating Expenses
------------------
First Quarters Ended
December 31, 2013 2012 % Change
-------------------- ---- ---- --------
(In millions, unless otherwise noted)
Operating Expenses
------------------
Selling, general &
administrative $117.8 $100.2 18%
Research &
development 60.3 54.4 11%
Depreciation &
amortization 16.7 19.0 -12%
Contingent
acquisition-related
costs 11.3 17.5 -35%
---- ----
Total operating
expenses $206.1 $191.1 8%
====== ======
Adjusted Operating Expenses
---------------------------
Total $189.3 $169.2 12%
====== ======
Adjusted operating expenses is a non-GAAP financial measure.
Reconciliations between GAAP and non-GAAP measures are provided at
the end of this release.
-- Adjusted first quarter operating expenses increased over the prior year
quarter primarily due to higher advertising at DoubleDown and higher R&D
expenses.
-- Adjusted operating expenses were 35% of revenues for the first quarter
compared to 32% of revenues in the prior year quarter.
Balance
Sheet and
Capital
Deployment
-----------
December 31, September 30,
% Change
2013 2013
---- ----
(In
millions,
unless
otherwise
noted)
Cash and
equivalents
(including
restricted
amounts) $648.0 $809.1 -20%
Working
capital 117.9 267.5 -56%
Contractual
debt
obligations 2,150.0 2,150.0 0%
-- During the first quarter, the company received 8.2 million shares
related to the previously announced accelerated share repurchase (ASR).
The total number of shares repurchased by IGT under the ASR through the
completion date of January 22, 2014 was 11.6 million, at a discounted
average price of $17.22 per share, representing approximately 5% of the
total shares outstanding when the program commenced.
-- During the quarter, the company announced its fifth consecutive
quarterly cash dividend increase, up 57% compared to the same quarter
last year.
-- During the first quarter, the company returned $226 million in the form
of dividends and share repurchases to its shareholders.
Other
References to per share amounts in this release are based on weighted average diluted shares of common stock outstanding, unless otherwise specified.
Outlook
Given declining gross gaming revenue trends, we anticipate that the lower end of our previously announced guidance range is more likely, with potential further downside risk. We are in the process of implementing a number of measures, including cost reductions, to mitigate this risk.
GAAP earnings per share from continuing operations for fiscal year 2014 will include acquisition-related expenses, primarily related to DoubleDown, severance costs, and certain discrete tax items or benefits, the amount of which is not determinable at this time. The company may also recognize 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 January 9, 2014, IGT will host a conference call to discuss its first quarter fiscal year 2014 earnings results on Thursday, January 23, 2014, at 2:00 p.m. PST. The access numbers are as follows:
Domestic callers dial +1 877-891-6979, passcode IGT
International callers dial +1 773-756-4700, 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/investors. The call will be archived until Thursday, February 6, 2014 at http://www.IGT.com/investors, 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 Thursday, February 6, 2014. The access numbers are as follows:
Domestic callers dial +1 866-513-4385
International callers dial +1 203-369-1984
Q1 FY 2014 Excel file
Q1 FY 2014 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 2014) 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; our ability to implement and manage cost reduction initiatives; future developments or changes affecting online gaming or social casino-style gaming, which is a new and evolving industry; and risks related to business combinations, investments in intellectual property and the integration of acquisitions. 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 2013 filed with the SEC on November 26, 2013 and available on the SEC website at www.sec.gov and on the investor relations section of our website at www.IGT.com/investors. Additional information will also be set forth in our Quarterly Report on Form 10-Q for our fiscal quarter ended December 31, 2013, which we expect to file with the SEC in the first quarter of calendar 2014. All information provided in this release is as of January 23, 2014, and IGT does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances.
IGT Resources:
-- Like us on Facebook
-- Play DoubleDown Casino Games
-- Like DoubleDown Casino on Facebook
-- Follow us on Twitter
-- View IGT's YouTube Channel
-- Check out our other Games and Gaming Systems
About IGT
International Game Technology (NYSE: IGT) is a global leader in casino gaming entertainment and continues to transform the industry by translating casino player experiences to social, mobile and interactive environments for markets around the world. IGT's acquisition of DoubleDown Interactive provides engaging social casino style entertainment to more than 6 million players monthly. More information about IGT is available at IGT.com or connect with IGT at @IGTNews or facebook.com/IGT. Anyone can play at the DoubleDown Casino by visiting http://apps.facebook.com/doubledowncasino or doubledowncasino.com
Consolidated Statements of Income (Unaudited and Condensed)
First Quarters Ended
December 31, 2013 2012
-------------------- ---- ----
(In millions, except per
share amounts)
Revenues
Gaming operations $223.0 $242.6
Product sales 243.6 234.8
Interactive 74.6 52.9
---- ----
Total revenues 541.2 530.3
Costs and operating expenses
Cost of gaming operations 86.8 89.5
Cost of product sales 116.7 109.2
Cost of interactive 27.9 22.1
Selling, general and
administrative 117.8 100.2
Research and development 60.3 54.4
Depreciation and
amortization 16.7 19.0
Contingent acquisition-
related costs 11.3 17.5
---- ----
Total costs and operating
expenses 437.5 411.9
Operating income 103.7 118.4
----- -----
Other income (expense)
Interest income 10.1 11.3
Interest expense (36.4) (31.7)
Other (1.9) (0.3)
---- ----
Total other income (expense) (28.2) (20.7)
Income before tax 75.5 97.7
Income tax provision
(benefit) (3.7) 32.4
---- ----
Net income $79.2 $65.3
===== =====
Basic earnings per share $0.31 $0.25
Diluted earnings per share $0.31 $0.24
Weighted average shares
outstanding
Basic 252.6 265.9
Diluted 255.3 267.9
Consolidated Balance Sheet (Unaudited and
Condensed)
December 31, September 30,
2013 2013
---- ----
(In
millions)
Assets
Current
assets
Cash and
equivalents $480.6 $713.3
Investment
securities 99.5 28.8
Restricted
cash and
investments 67.9 67.0
Jackpot
annuity
investments 55.9 56.5
Receivables,
net 574.7 577.9
Inventories 74.5 90.1
Other assets
and
deferred
costs 225.2 242.4
----- -----
Total
current
assets 1,578.3 1,776.0
Property,
plant and
equipment,
net 467.3 483.9
Jackpot
annuity
investments 264.4 268.6
Contracts
and notes
receivable,
net 166.5 165.6
Goodwill and
other
intangibles,
net 1,588.0 1,601.7
Other assets
and
deferred
costs 283.0 317.0
----- -----
Total Assets $4,347.5 $4,612.8
======== ========
Liabilities
and
Shareholders'
Equity
Current
liabilities
Short-term
debt $836.4 $826.6
Accounts
payable 96.9 110.0
Jackpot
liabilities,
current
portion 126.0 131.7
Dividends
payable 27.5 25.9
Other
accrued
liabilities 373.6 414.3
----- -----
Total
current
liabilities 1,460.4 1,508.5
Long-term
debt 1,356.4 1,366.3
Jackpot
liabilities 286.7 293.3
Other
liabilities 139.1 190.6
----- -----
Total
Liabilities 3,242.6 3,358.7
Total Equity 1,104.9 1,254.1
------- -------
Total
Liabilities
and
Shareholders'
Equity $4,347.5 $4,612.8
======== ========
Consolidated Statements of Cash Flows (Unaudited and
Condensed)
Three Months Ended December
31, 2013 2012
--------------------------- ---- ----
(In millions)
Operating
Net income $79.2 $65.3
Adjustments:
Depreciation and
amortization 51.3 57.7
Acquisition-related
contingent earn-out costs 4.5 2.1
Other non-cash items 28.6 30.5
Changes in operating assets
and liabilities, excluding
acquisitions:
Receivables (13.2) 14.4
Inventories 15.6 2.6
Accounts payable and
accrued liabilities (51.0) (83.5)
Jackpot liabilities (16.6) (24.2)
Income taxes, net of
employee stock plans (17.8) 28.8
Other assets and deferred
costs (4.5) 0.8
---- ---
Net operating cash flows 76.1 94.5
---- ----
Investing
Capital expenditures (24.6) (37.6)
Investment securities, net (70.6) -
Jackpot annuity
investments, net 9.0 9.9
Changes in restricted cash (0.8) 5.7
Loans receivable, net 6.4 7.6
Other 3.3 4.6
--- ---
Net investing cash flows (77.3) (9.8)
----- ----
Financing
Debt-related proceeds
(payments), net (0.5) (75.0)
Employee stock plan
proceeds 8.3 1.8
Share repurchases,
including net shares (211.0) -
Dividends paid (25.9) (16.1)
----- -----
Net financing cash flows (229.1) (89.3)
------ -----
Foreign exchange rates
effect on cash (2.4) (1.0)
---- ----
Net change in cash and
equivalents (232.7) (5.6)
Beginning cash and
equivalents 713.3 206.3
----- -----
Ending cash and equivalents $480.6 $200.7
====== ======
Supplemental Data (Unaudited)
Revenue Metrics
First Quarters Ended December
31, 2013 2012
----------------------------- ---- ----
In millions, unless otherwise
noted
Gaming Operations
-----------------
Revenues $223.0 $242.6
North America 191.6 208.6
International 31.4 34.0
Gross margin 61% 63%
North America 59% 62%
International 72% 69%
Installed base (units '000) 54.3 56.8
North America 41.3 43.0
International 13.0 13.8
Yield (average revenue per unit
per day -$0.00) $44.99 $46.80
Product Sales
-------------
Revenues $243.6 $234.8
North America 170.0 158.9
International 73.6 75.9
Machines $167.0 $157.5
North America 118.0 101.8
International 49.0 55.7
Non-machine $76.6 $77.3
North America 52.0 57.1
International 24.6 20.2
Gross margin 52% 53%
North America 53% 56%
International 50% 48%
Machine units recognized ('000) 12.8 10.7
North America 9.6 7.2
International 3.2 3.5
Machine units shipped ('000)
[includes units where revenues
deferred] 13.0 9.3
North America 9.8 6.8
New 3.7 1.7
Replacement 6.1 5.1
International 3.2 2.5
New 0.7 0.8
Replacement 2.5 1.7
Machine ASP ('000) $13.2 $14.8
North America 12.3 14.1
International 15.3 16.1
Interactive
-----------
Revenues $74.6 $52.9
North America 65.8 41.9
International 8.8 11.0
Social Gaming 64.8 41.3
North America 64.8 41.3
International - -
IGTi 9.8 11.6
North America 1.0 0.6
International 8.8 11.0
Gross margin 63% 58%
North America 62% 60%
International 66% 50%
DoubleDown average user
statistics*
DAU (Daily active users) ('000) 1,716 1,462
MAU (Monthly active users)
('000) 6,198 4,931
Bookings per DAU ($0.00) $0.42 $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, 2013
-------------------------------------
Cost of Cost of Operating Operating Net Diluted
Gaming Operations Interactive Expenses Income Income (a) EPS
----------------- ----------- -------- ------ --------- ---
GAAP
measures $86.8 $27.9 $206.1 $103.7 $79.2 $0.31
% of revenue 38% 19%
Acquisition-related charges: (b)
Contingent retention & earn-out - (11.3) 11.3 7.5 0.03
Amortization of intangibles (2.7) (3.4) 6.1 4.0 0.02
Severance (0.6) - (2.1) 2.7 1.8 0.01
Certain discrete tax items
(benefits) - - - (29.6) (0.12)
Total non-
GAAP
adjustments (0.6) (2.7) (16.8) 20.1 (16.3) (0.06)
Adjusted
measures $86.2 $25.2 $189.3 $123.8 $62.9 $0.25
% of revenue 35% 23%
--- ---
(a)Adjustments tax effected at 34%
(b)Primarily related to DoubleDown
First Quarter Ended December 31, 2012
-------------------------------------
Product Sales Revenue Cost of Operating Operating Net Diluted
Interactive Expenses Income Income (a) EPS
-------- ------ ------ --- ---
GAAP
measures $234.8 $22.1 $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 $229.8 $19.8 $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,
---------------------------------------------------------
2013 2012
---- ----
GAAP Net income $79.2 $65.3
Other (income) expense, net 28.2 20.7
Income tax provision (3.7) 32.4
Depreciation and
amortization 51.3 57.7
Other charges:
Share-based compensation 8.9 8.6
Contingent acquisition-
related costs 11.3 17.5
---- ----
Adjusted EBITDA $175.2 $202.2
====== ======
Free Cash Flow For The Three Months Ended
December 31,
-----------------------------------------
2013 2012
---- ----
GAAP net operating cash
flows $76.1 $94.5
Investment in property,
plant and equipment (7.6) (7.3)
Investment in gaming
operations equipment (16.9) (30.1)
Investment in intellectual
property (0.1) (0.2)
---- ----
Free Cash Flow (before
dividends) 51.5 56.9
Dividends paid (25.9) (16.1)
----- -----
Free Cash Flow (after
dividends) $25.6 $40.8
===== =====
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
