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International Game Technology : Reports Second Quarter Fiscal Year 2012 Results

04/24/2012 | 04:20pm US/Eastern
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LAS VEGAS, Apr. 24, 2012 /PRNewswire/ -- International Game Technology (NYSE: IGT) today reported operating results for the fiscal second quarter ended March 31, 2012.

"As expected, our financial results are strengthening as we move through the fiscal year - evidenced by our growth in both revenues and earnings in our second quarter," said Patti Hart, CEO of IGT. "Every aspect of our business is providing a meaningful contribution to our strong financial performance. It's gratifying to see the effort of our employees and the proficiency of our strategic investments generating returns for our shareholders."

    Consolidated Results
    --------------------
    ($ in
     millions,
     except per
     share
     amounts)                   Quarters Ended                     Six Months Ended
                                   March 31,                          March 31,
                                   ---------                          ---------
                           2012                  2011 % Change                      2012   2011 % Change
                           ----                  ---- --------                      ----   ---- --------
    GAAP Results
    Revenue              $541.2                $477.0          13%                $986.8 $928.2            6%
    Operating
     income              $118.0                $128.1          -8%                $217.9 $248.3          -12%
    Income from
     continuing
     operations           $62.4                 $67.7          -8%                $112.7 $140.5          -20%
    Earnings per
     share from
     continuing
     operations           $0.21                 $0.22          -5%                 $0.38  $0.47          -19%
    Net
     operating
     cash flows                                                                   $176.7 $263.7          -33%

    Non-GAAP
     Results
    Adjusted
     operating
     income              $144.2                $131.3          10%                $243.9 $252.0           -3%
    Adjusted
     income from
     continuing
     operations           $79.5                 $67.7          17%                $130.6 $129.2            1%
    Adjusted
     earnings
     per share
     from
     continuing
     operations           $0.27                 $0.22          23%                 $0.44  $0.43            2%
    Free cash
     flow
     (before
     dividends)                                                                    $53.1 $174.4          -70%

    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.

    --  Revenues increased 13% to $541 million in the second quarter, primarily
        due to increases in North America product sales and interactive
        businesses.
    --  Non-GAAP adjusted measures primarily reflect the exclusion of charges
        related to the acquisition of Double Down and a distributor settlement.
    Gaming Operations
    -----------------
    ($ in
     millions,
     unless
     otherwise
     noted)                  Quarters Ended                      Six Months Ended
                                March 31,                           March 31,
                                ---------                           ---------
                        2012                  2011  % Change                      2012    2011  % Change
                        ----                  ----  --------                      ----    ----  --------

    Revenue           $300.4                $269.8           11%                $565.0  $522.7            8%
    Gross profit      $181.6                $167.4            8%                $342.0  $326.3            5%
    Gross margin          60%                   62%          -3%                    61%     62%          -2%
    Installed
     base             56,100                52,500            7%                56,100  52,500            7%
    Average
     revenue per
     unit per
     day (0.00)       $59.09                $56.40            5%                $56.44  $54.48            4%

    --  Revenues increased 11% to $300 million in the second quarter, primarily
        due to increases in the interactive businesses and installed base.
    --  Gross margin decreased to 60% from 62% in the second quarter, primarily
        due to higher depreciation expense and the inclusion of the interactive
        businesses.
    --  Installed base increases were primarily driven by an increase in North
        America and International lease operations.
    --  Excluding the positive impact from the interactive businesses, average
        revenue per unit per day in the second quarter was $52.34, up 3%
        sequentially but down 4% over the prior year quarter, mainly due to
        normal seasonality and a higher mix of lower-yielding units,
        respectively.
    --  DoubleDown Casino increased its monthly users by 24% to 5.6 million as
        of March 31, 2012 when compared to December 31, 2011.
    Product Sales
    -------------
    ($ in
     millions,
     unless
     otherwise
     noted)               Quarters Ended                      Six Months Ended
                             March 31,                           March 31,
                             ---------                           ---------
                     2012                  2011  % Change                      2012    2011  % Change
                     ----                  ----  --------                      ----    ----  --------

    Revenue        $240.8                $207.2           16%                $421.8  $405.5            4%
    Gross profit   $132.0                $115.2           15%                $223.6  $225.7           -1%
    Gross margin       55%                   56%          -2%                    53%     56%          -5%
    Units
     recognized
     ('000)          10.2                   9.0           13%                  17.5    17.3            1%
    Average
     machine sales
     price ('000)   $15.8                 $14.6            8%                 $15.8   $14.4           10%

    --  Revenues increased 16% to $241 million in the second quarter, driven by
        higher unit sales and average selling price.
    --  Gross margin decreased to 55% from 56% in the second quarter, primarily
        due to higher international non-standard manufacturing costs.
    --  North America product sales gross margin increased 210 bps
        year-over-year and 480 bps sequentially, due to favorable mix and lower
        non-standard manufacturing costs.
    --  Units recognized increased 13% in the second quarter, primarily due to a
        32% increase in North America replacement units.
    --  Average machine sales price increased 8%, mainly due to a favorable mix
        of higher priced boxes, including G23 MLD and Universal Slant MLD boxes.
    Operating Expenses and Other Income/Expense
    -------------------------------------------
    ($ in millions)                               Quarters Ended                     Six Months Ended
                                                     March 31,                          March 31,
                                                     ---------                          ---------
                                             2012                  2011 % Change                      2012   2011 % Change
                                             ----                  ---- --------                      ----   ---- --------
    Operating Expenses
    ------------------
    Selling, general &
     administrative                        $109.3                 $89.1          23%                $199.1 $171.3          16%
    Research &
     development                             55.3                  48.7          14%                 102.2   97.6           5%
    Depreciation &
     amortization                            19.3                  16.7          16%                  34.7   34.8           -
    Contingent
     acquisition
     related costs                           11.7                     -           -                   11.7      -           -
                                             ----                   ---                               ----    ---
    Total operating
     expenses                              $195.6                $154.5          27%                $347.7 $303.7          14%
                                           ======                ======                             ====== ======

    --  Operating expenses increased primarily due to additional expenses
        related to the interactive businesses, including recently completed
        acquisitions.
    --  Other expense, net, in the second quarter totaled $21 million compared
        to $23 million in the prior year quarter, primarily attributable to
        reduced interest expense.
    Cash Flows, Balance Sheet and Capital Deployment
    ------------------------------------------------
    ($ in
     millions)                                   Quarters Ended
                                                 --------------
                                            March 31,           Sept. 30
                                                          2012               2011 % Change
                                                          ----               ---- --------

    Cash
     and
     equivalents
     (including
     restricted
     amounts)                                           $360.6             $552.0          -35%
    Working
     capital                                            $667.0             $875.2          -24%
     Contractual
     debt
     obligations                                      $1,650.0           $1,650.0            -

    --  Cash and working capital decreased 35% and 24%, respectively, mainly as
        a result of cash deployed associated with the acquisition of Double
        Down.
    --  During the second quarter, the company repurchased 3.0 million shares of
        common stock at an average price of $15.43 per share for a total cost of
        $46 million.
    --  Over the past four quarters, the company has repurchased 6.4 million
        shares of common stock at an average price of $15.65 per share for a
        total cost of $100 million.

References to per share amounts in this release are based on diluted shares of common stock, unless otherwise specified.

Outlook
Based on current expectations and the operating results for the second quarter of fiscal 2012, the company is raising its fiscal year 2012 guidance for adjusted earnings from continuing operations to $0.98 to $1.04 per share.

Earnings Conference Call
As previously announced on Apr. 10, 2012, IGT will host a conference call to discuss its Second Quarter Fiscal Year 2012 earnings results on Tuesday, Apr. 24, 2012, at 2:00 p.m. PDT. 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 Thursday, May 3, 2012 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 beginning at approximately 4:00 p.m. PDT on Tuesday, Apr. 24, 2012. This replay will run through Thursday, May 3, 2012. The access numbers are as follows:

Domestic callers dial +1 866-382-4784
International callers dial +1 203-369-0363

Q2 FY 2012 Excel file

Q2 FY 2012 PDF of this press release

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
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 2012) and our strategic and operational plans. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, general economic conditions and changes in economic conditions affecting the gaming industry; 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; changes in laws or regulations affecting our business; 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 the additional risks and uncertainties included 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 2011 filed with the SEC on November 30, 2011 and our Quarterly Report on Form 10-Q for our fiscal quarter ended December 31, 2011 filed with the SEC on February 8, 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 March 31, 2012, which we expect to file with the SEC in the second quarter of calendar 2012. All information provided in this release is as of April 24, 2012, and IGT undertakes no duty to update this information.

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             Six Months
                                                                          Ended
                                               March 31,                March 31,
                                               ---------                ---------
                                                         2012     2011               2012    2011
                                                         ----     ----               ----    ----
    (In
     millions,
     except per
     share
     amounts)
    Revenues
    Gaming
     operations                                        $300.4   $269.8             $565.0  $522.7
    Product
     sales                                              240.8    207.2              421.8   405.5
                                                        -----    -----              -----   -----
    Total
     revenues                                           541.2    477.0              986.8   928.2
                                                        -----    -----              -----   -----
    Costs and
     operating
     expenses
    Cost of
     gaming
     operations                                         118.8    102.4              223.0   196.4
    Cost of
     product
     sales                                              108.8     92.0              198.2   179.8
    Selling,
     general
     and
     administrative                                     109.3     89.1              199.1   171.3
    Research
     and
     development                                         55.3     48.7              102.2    97.6
     Depreciation
     and
     amortization                                        19.3     16.7               34.7    34.8
    Contingent
     acquisition
     related
     costs                                               11.7        -               11.7       -
                                                         ----      ---               ----     ---
    Total costs
     and
     operating
     expenses                                           423.2    348.9              768.9   679.9
                                                        -----    -----              -----   -----
    Operating
     income                                             118.0    128.1              217.9   248.3
                                                        -----    -----              -----   -----
    Other
     income
     (expense)
    Interest
     income                                              10.8     13.3               22.9    26.6
    Interest
     expense                                            (30.0)   (35.6)             (60.1)  (71.0)
    Other                                                (2.0)    (1.0)              (4.8)    3.4
                                                         ----     ----               ----     ---
    Total other
     income
     (expense)                                          (21.2)   (23.3)             (42.0)  (41.0)
                                                        -----    -----              -----   -----
    Income from
     continuing
     operations
     before tax                                          96.8    104.8              175.9   207.3
    Income tax
     provision                                           34.4     37.1               63.2    66.8
                                                         ----     ----               ----    ----
    Income from
     continuing
     operations                                          62.4     67.7              112.7   140.5
    Income
     (loss)
     from
     discontinued
     operations,
     net of tax                                          (0.5)     1.9               (1.5)    2.8
                                                         ----      ---               ----     ---
    Net income                                          $61.9    $69.6             $111.2  $143.3
                                                        =====    =====             ======  ======
    Basic
     earnings
     (loss) per
     share
    Continuing
     operations                                         $0.21    $0.22              $0.38   $0.47
     Discontinued
     operations                                             -     0.01              (0.01)   0.01
                                                          ---     ----              -----    ----
    Net income                                          $0.21    $0.23              $0.37   $0.48
                                                        =====    =====              =====   =====
    Diluted
     earnings
     (loss) per
     share
    Continuing
     operations                                         $0.21    $0.22              $0.38   $0.47
     Discontinued
     operations                                             -     0.01              (0.01)   0.01
                                                          ---     ----              -----    ----
    Net income                                          $0.21    $0.23              $0.37   $0.48
                                                        =====    =====              =====   =====
    Weighted
     average
     shares
     outstanding
    Basic                                               296.7    298.4              297.0   298.0
    Diluted                                             298.1    299.9              298.6   299.4


    CONSOLIDATED BALANCE SHEET (Unaudited and Condensed)

                                                    March 31,       September 30,
                                                    ---------       -------------
                                                               2012                   2011
                                                               ----                   ----
    (In millions)
    Assets
    Current assets
    Cash and equivalents                                     $271.1                 $460.0
    Restricted cash and
     investments                                               89.5                   92.0
    Jackpot annuity
     investments                                               61.5                   63.2
    Receivables, net                                          511.4                  487.2
    Inventories                                                90.6                   73.0
    Other assets and
     deferred costs                                           217.4                  234.5
                                                              -----                  -----
    Total current assets                                    1,241.5                1,409.9
    Property, plant and
     equipment, net                                           582.0                  552.1
    Jackpot annuity
     investments                                              313.0                  324.6
    Contracts and notes
     receivable, net                                          128.2                  126.4
    Goodwill and other
     intangibles, net                                       1,725.1                1,401.8
    Other assets and
     deferred costs                                           358.7                  339.6
                                                              -----                  -----
    Total Assets                                           $4,348.5               $4,154.4
                                                           ========               ========
    Liabilities and
     Shareholders' Equity
    Current liabilities
    Accounts payable                                          $89.1                 $103.0
    Jackpot liabilities,
     current portion                                          150.4                  143.0
    Dividends payable                                          17.7                   17.8
    Other accrued
     liabilities                                              317.3                  270.9
                                                              -----                  -----
    Total current
     liabilities                                              574.5                  534.7
    Long-term debt                                          1,656.4                1,646.3
    Jackpot liabilities                                       346.4                  365.4
    Other liabilities                                         260.4                  163.2
                                                              -----                  -----
    Total Liabilities                                       2,837.7                2,709.6
    Total Equity                                            1,510.8                1,444.8
                                                            -------                -------
    Total Liabilities and
     Shareholders' Equity                                  $4,348.5               $4,154.4
                                                           ========               ========


    CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited and Condensed)

                                                                   Six Months Ended
                                                                      March 31,
                                                                      ---------
                                                                                 2012    2011
                                                                                 ----    ----
    (In millions)
    Operating
    Net income                                                                 $111.2  $143.3
    Depreciation and amortization                                               115.2   109.2
    Other non-cash items                                                         42.1    39.6
    Changes in operating assets and
     liabilities, excluding acquisitions:
    Receivables                                                                 (28.5)    3.8
    Inventories                                                                 (14.6)   (6.2)
    Accounts payable and accrued liabilities                                      3.8   (35.4)
    Jackpot liabilities                                                         (21.9)  (56.4)
    Income taxes                                                                (13.8)   47.7
    Other assets and deferred costs                                             (16.8)   18.1
                                                                                -----    ----
    Net operating cash flows                                                    176.7   263.7
                                                                                -----   -----
    Investing
    Capital expenditures                                                       (123.6)  (89.3)
    Jackpot annuity investments, net                                             23.6    26.6
    Changes in restricted cash                                                    3.2    23.0
    Loans receivable, net                                                        14.9    14.3
    Business/VIE acquisition/deconsolidation                                   (233.0)      -
    Other                                                                        19.8    25.7
                                                                                 ----    ----
    Net investing cash flows                                                   (295.1)    0.3
                                                                               ------     ---
    Financing
    Debt related proceeds (payments), net                                           -  (100.0)
    Employee stock plans                                                         14.3    16.7
    Share repurchases                                                           (50.1)      -
    Noncontrolling interest acquired                                             (2.5)      -
    Dividends paid                                                              (35.7)  (35.8)
                                                                                -----   -----
    Net financing cash flows                                                    (74.0) (119.1)
                                                                                -----  ------
    Foreign exchange rates effect on cash                                         3.5     2.6
                                                                                  ---     ---
    Net change in cash and equivalents                                         (188.9)  147.5
    Beginning cash and equivalents                                              460.0   158.4
                                                                                -----   -----
    Ending cash and equivalents                                                $271.1  $305.9
                                                                               ======  ======


    SUPPLEMENTAL DATA
    (Unaudited)

    Revenue Metrics                  Quarters Ended              Six Months Ended
                                       March 31,                    March 31,
                                       ---------                    ---------
                                                   2012    2011                     2012    2011
                                                   ----    ----                     ----    ----
    In millions, unless otherwise
     noted
                   Gaming Operations
                   -----------------
    Revenues                                     $300.4  $269.8                   $565.0  $522.7
    North America                                 254.7   232.9                    474.3   450.9
    International                                  45.7    36.9                     90.7    71.8
    Gross margin                                     60%     62%                      61%     62%
    North America                                    59%     61%                      59%     61%
    International                                    67%     71%                      67%     71%
    Installed base ('000)                          56.1    52.5                     56.1    52.5
    North America                                  42.7    40.5                     42.7    40.5
    International                                  13.4    12.0                     13.4    12.0
    Average revenue per unit per day
     (0.00)                                      $59.09  $56.40                   $56.44  $54.48
    Double Down Average User
     Statistics*
    Daily users                                     1.4
    Monthly users                                   5.0
    Bookings per daily user (0.00)                $0.24
    *as a single application with
     multiple games, active users
     equal unique users
                     Product Sales
                     -------------
    Revenues                                     $240.8  $207.2                   $421.8  $405.5
    North America                                 160.8   135.0                    263.9   268.7
    International                                  80.0    72.2                    157.9   136.8
    Machines                                     $161.1  $131.1                   $276.8  $249.7
    North America                                 101.4    77.8                    160.5   153.3
    International                                  59.7    53.3                    116.3    96.4
    Non-machine                                   $79.7   $76.1                   $145.0  $155.8
    North America                                  59.4    57.2                    103.4   115.4
    International                                  20.3    18.9                     41.6    40.4
    Gross margin                                     55%     56%                      53%     56%
    North America                                    57%     55%                      55%     56%
    International                                    50%     56%                      49%     55%
    Units recognized ('000)                        10.2     9.0                     17.5    17.3
    North America                                   6.8     5.7                     10.6    10.8
    International                                   3.4     3.3                      6.9     6.5
    Units shipped ('000) [includes
     units where revenues deferred]                10.5     8.9                     17.0    16.4
    North America                                   6.7     5.3                     10.2     9.8
    New                                             1.7     1.5                      2.4     2.9
    Replacement                                     5.0     3.8                      7.8     6.9
    International                                   3.8     3.6                      6.8     6.6
    New                                             2.0     2.3                      3.3     3.1
    Replacement                                     1.8     1.3                      3.5     3.5
    Average revenue per unit ('000)               $23.6   $23.0                    $24.1   $23.4
    North America                                  23.6    23.7                     24.9    24.9
    International                                  23.5    21.9                     22.9    21.0
    Average machine sales price
     ('000)                                       $15.8   $14.6                    $15.8   $14.4
    North America                                  14.9    13.6                     15.1    14.2
    International                                  17.6    16.2                     16.9    14.8


    Reconciliations of GAAP to Non-GAAP Measures (In millions, except EPS)

                                                                                                 Quarters Ended       Six Months Ended
                                                                                                    March 31,            March 31,
                                                                                                    ---------            ---------
                                                                                                  2012           2011          2012             2011
                                                                                                  ----           ----          ----             ----
    Adjusted Income from Continuing Operations
    ------------------------------------------
    GAAP income from continuing operations                                                       $62.4          $67.7        $112.7           $140.5
                                                                                                 -----          -----        ------           ------


    Acquisition related charges (primarily related to Double
     Down)
    Contingent retention &                                     Contingent acquisition related
     earn-out                                                  costs                              11.7              -          11.7                -
    Amortization of
     intangibles                                              Cost of gaming operations            2.3              -           2.3                -
    Amortization of
     intangibles                                              Depreciation & amortization          3.9              -           3.9                -
    Professional fees                                         Selling, general & administrative    4.5              -           5.7                -
    Severance                                                 Selling, general & administrative    1.2              -           1.2                -
    Distributor settlement                                    Selling, general & administrative    3.1              -           3.1                -
    Investment gain (no tax
     benefit)                                                 Other income (expense), net            -              -             -             (4.3)
                                                              -----------------
    Total adjustments before tax                                                                  26.7              -          27.9             (4.3)
    Tax effect at 36%                                        Income tax provision                (9.6)             -         (10.0)               -

    Certain discrete tax
     items (benefits)                                         Income tax provision                   -              -             -             (7.0)
                                                              -----------------
    Total adjustments after tax                                                                   17.1              -          17.9            (11.3)
                                                                                                  ----            ---          ----            -----
    Adjusted income from continuing operations                                                   $79.5          $67.7        $130.6           $129.2
                                                                                                 =====          =====        ======           ======


    Adjusted EPS from Continuing Operations
    ---------------------------------------
    GAAP EPS from continuing operations                                                          $0.21          $0.22         $0.38            $0.47
                                                                                                 -----          -----         -----            -----

    Acquisition related charges:
    Contingent retention & earn-out                                                               0.03              -          0.03                -
    Amortization of intangibles                                                                -              -         -                  -
    Amortization of intangibles                                                                   0.01              -          0.01                -
    Professional fees                                                                             0.01              -          0.01                -
    Severance                                                                                  -              -         -                  -
    Distributor settlement                                                                        0.01              -          0.01                -
    Investment gain                                                                            -              -         -              (0.01)
    Certain discrete tax items (benefits)                                                      -              -         -              (0.03)
                                                                                             ---            ---       ---              -----
    Total adjustments                                                                             0.06              -          0.06            (0.04)
                                                                                                  ----            ---          ----            -----
    Adjusted EPS from continuing operations                                                      $0.27          $0.22         $0.44            $0.43
                                                                                                 =====          =====         =====            =====


    Adjusted income from continuing
     operations and adjusted EPS from
     continuing operations are
     supplemental non-GAAP financial
     measures commonly used by
     management and industry analysts
     to evaluate our financial
     performance.  Adjusted income from
     continuing operations should not
     be construed as an alternative to
     income from continuing operations,
     and Adjusted EPS from continuing
     operations should not be construed
     as an alternative to EPS from
     continuing operations, as
     indicators of our operating
     performance determined in
     accordance with GAAP (generally
     accepted accounting principles).
     All companies do not calculate
     Adjusted income from continuing
     operations or Adjusted EPS from
     continuing operations in the same
     manner, and IGT's presentation may
     not be comparable to that of other
     companies.
                                Quarters Ended     Six Months Ended
                                     March 31,         March 31,
                                     ---------         ---------
                                  2012           2011         2012    2011
                                  ----           ----         ----    ----
    Adjusted Operating Income
     and Margin
    -------------------------
    GAAP operating income       $118.0         $128.1       $217.9  $248.3

    Amortization of acquired
     intangibles in cost of
     gaming operations             2.3              -          2.3       -
    Total adjustments to
     operating expenses (below)   23.9            3.2         23.7     3.7
                                  ----            ---         ----     ---
    Adjusted operating income   $144.2         $131.3       $243.9  $252.0
                                ======         ======       ======  ======
    Adjusted operating margin       27%            28%          25%     27%



    Adjusted Operating Expenses
    ---------------------------
    GAAP operating expenses     $195.6         $154.5       $347.7  $303.7
                                ------         ------       ------  ------
    Acquisition related
     charges:
    Contingent costs             (11.7)             -        (11.7)      -
    Amortization of intangibles   (3.9)             -         (3.9)      -
    Professional fees             (4.5)             -         (5.7)      -
    Severance                     (1.2)             -         (1.2)      -
    Distributor settlement        (3.1)             -         (3.1)      -
    Bad debt provision             0.5           (3.2)         1.9    (3.7)
                                   ---           ----          ---    ----
    Total adjustments            (23.9)          (3.2)       (23.7)   (3.7)
                                 -----           ----        -----    ----
    Adjusted operating expenses $171.7         $151.3       $324.0  $300.0
                                ======         ======       ======  ======
    % of revenue                    32%            32%          33%     32%

    Adjusted operating income, Adjusted
     operating margin, and Adjusted
     operating expenses are
     supplemental non-GAAP financial
     measures commonly used by
     management and industry analysts
     to evaluate our financial and
     operating performance.  Adjusted
     operating margin is a measure of
     adjusted operating income as a
     percentage of total revenues.
     Adjusted operating income,
     adjusted operating margin, and
     adjusted operating expenses,
     should not be construed as
     alternatives to operating income,
     operating margin, and operating
     expenses, respectively, as
     indicators of operating
     performance determined in
     accordance with GAAP (generally
     accepted accounting principles).
     All companies do not calculate
     adjusted operating income,
     adjusted operating margin, and
     adjusted operating expenses in the
     same manner and IGT's presentation
     may not be comparable to that of
     other companies.
                                           Quarters Ended Six Months Ended
                                              March 31,       March 31,
                                              ---------       ---------
                                             2012           2011      2012   2011
                                             ----           ----      ----   ----
    Adjusted EBITDA
    ---------------

    GAAP Income from continuing operations  $62.4          $67.7    $112.7 $140.5
    Other (income) expense, net              21.2           23.3      42.0   41.0
    Income tax provision                     34.4           37.1      63.2   66.8
    Depreciation and amortization            60.6           52.8     115.2  106.1
    Other charges:
    Share-based compensation                  8.5           10.9      16.7   22.3
    Contingent acquisition related costs     11.7              -      11.7      -
                                             ----            ---      ----    ---
    Adjusted EBITDA                        $198.8         $191.8    $361.5 $376.7
                                           ======         ======    ====== ======

    Adjusted EBITDA (income from continuing
     operations before interest and other
     non-operating income/expense-net,
     income tax provision, depreciation and
     amortization, and other charges noted in
     the reconciliation) is a supplemental
     non-GAAP financial measure commonly
     used by our management and industry
     analysts to evaluate our financial
     performance.  Adjusted EBITDA provides
     useful information to investors
     regarding our ability to service debt
     and is a commonly used financial
     analysis tool for measuring and
     comparing gaming companies in several
     areas of liquidity, operating
     performance, valuation and leverage.
     Adjusted 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) determined
     in accordance with GAAP (generally
     accepted accounting principles).  All
     companies do not calculate Adjusted
     EBITDA in the same manner, and IGT's
     presentation may not be comparable to
     that of other companies.

                                          Six Months Ended
                                              March 31,
                                              ---------
                                            2012              2011
                                            ----              ----
    Free Cash Flow
    --------------

    GAAP net operating cash flows         $176.7            $263.7
    Investment in property, plant and
     equipment                             (34.5)             (8.4)
    Investment in gaming operations
     equipment                             (87.1)            (80.2)
    Investment in intellectual property     (2.0)             (0.7)
                                            ----              ----
    Free Cash Flow (before dividends)       53.1             174.4
    Dividends paid                         (35.7)            (35.8)
                                           -----             -----
    Free Cash Flow (after dividends)       $17.4            $138.6
                                           =====            ======

    Free cash flow is a supplemental non-
     GAAP financial measure commonly used
     by our management and industry
     analysts to evaluate the
     discretionary amount of operating
     cash flows.  Free cash flow should
     not be construed as an alternative
     to net operating cash flows or other
     cash flow measurements determined in
     accordance with GAAP (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 that of other
     companies.

    Guidance for Adjusted Earnings from Continuing Operations for
     Fiscal 2012

                                         Range Estimate
                                          For Fiscal Year
                                                2012
                                         ---------------
    (In millions, except EPS)
                                               Low                High
                                               ---                ----
    Guidance for GAAP EPS from
     continuing operations                          $0.82             $0.88
    Acquisition related
     charges                                         0.15              0.15
    Distributor settlement                           0.01              0.01
                                                     ----              ----
    Guidance for Adjusted EPS
     from continuing
     operations                                     $0.98             $1.04
                                                    =====             =====

    Adjusted EPS from continuing
     operations for the fiscal year is a
     supplemental non-GAAP financial
     measure commonly used by management
     and industry analysts to evaluate
     our financial performance.
     Adjusted EPS from continuing
     operations should not be construed
     as an alternative to EPS from
     continuing operations, as an
     indicator of our operating
     performance determined in
     accordance with generally accepted
     accounting principles.  All
     companies do not calculate adjusted
     EPS from continuing operations in
     the same manner, and IGT's
     presentation may not be comparable
     to that of other companies. This
     guidance is as of April 24, 2012,
     and IGT undertakes no duty to
     update this guidance.

SOURCE International Game Technology

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