News Release

IGT Reports Second Quarter Fiscal Year 2014 Results

(LAS VEGAS – April 22, 2014) – International Game Technology (NYSE: IGT) today reported operating results for the second quarter ended March 31, 2014.

    "During the quarter, we took decisive action to reduce IGT's cost structure and position the company for long-term earnings growth," said Patti Hart, CEO of IGT. "Looking forward, we are confident that we will be able to leverage our leaner cost structure, substantial R&D investments and premium brands to drive shareholder value."

 

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News Release

		Second Quarters												Six Months
Periods Ended March 31,		2014				2013				% Change				2014				2013				% Change
(In millions, except per share amounts)
GAAP Measures
Revenue		$	512.8			$	600.0				-15	%		$	1,054.0			$	1,130.2				-7	%
Operating income			72.1				129.3				-44	%			175.7				247.7				-29	%
Net income			25.7				78.2				-67	%			105.0				143.5				-27	%
Earnings per share		$	0.10			$	0.29				-66	%		$	0.42			$	0.54				-22	%
Net operating cash flows														$	(65.2	)		$	182.5				-136	%
Non-GAAP Measures
Adjusted operating income		$	107.5			$	163.5				-34	%		$	231.2			$	301.0				-23	%
Adjusted net income			49.4				95.1				-48	%			112.4				171.5				-34	%
Adjusted earnings per share		$	0.20			$	0.36				-44	%		$	0.45			$	0.64				-30	%
Free cash flow (before dividends)														$	(111.4	)		$	126.1				-188	%
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.

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News Release

 

		Second Quarters												Six Months
Periods Ended March 31,		2014				2013				% Change				2014				2013				% Change
(In millions, unless otherwise noted)
Revenue		$	230.4			$	254.3				-9	%		$	453.4			$	496.9				-9	%
Gross profit			140.4				156.7				-10	%			276.6				309.8				-11	%
Gross margin			61	%			62	%			-1	%			61	%			62	%			-2	%
Installed base ('000)			53.4				56.7				-6	%			53.4				56.7				-6	%
Yield (average revenue per unit per day - $0.00)		$	47.00			$	49.26				-5	%		$	46.11			$	47.99				-4	%

 

 

 

 

		Second Quarters												Six Months
Periods Ended March 31,		2014				2013				% Change				2014				2013				% Change
(In millions, unless otherwise noted)
Revenue		$	202.6			$	279.0				-27	%		$	446.2			$	513.7				-13	%
Gross profit			104.0				144.0				-28	%			230.9				269.5				-14	%
Gross margin			51	%			52	%			-1	%			52	%			52	%			0	%
Machine units recognized ('000)			7.9				14.3				-45	%			20.7				25.0				-17	%
Machine average sales price ('000)		$	14.7			$	14.1				4	%		$	13.7			$	14.4				-5	%

 

 

 

 

 

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		Second Quarters												Six Months
Periods Ended March 31,		2014				2013				% Change				2014				2013				% Change
(In millions, unless otherwise noted)
Revenue		$	79.8			$	66.7				20	%		$	154.4			$	119.6				29	%
Social gaming			68.8				54.3				27	%			133.6				95.6				40	%
IGTi			11.0				12.4				-11	%			20.8				24.0				-13	%
Gross Margin			61	%			61	%			0	%			62	%			60	%			3	%
Social gaming			62	%			61	%			2	%			62	%			61	%			2	%
IGTi			54	%			59	%			-8	%			59	%			55	%			7	%
DoubleDown average user statistics*
DAU (Daily active users) ('000)			1,775				1,690				5	%			1,745				1,575				11	%
MAU (Monthly active users) ('000)			6,218				6,276				-1	%			6,208				5,596				11	%
Bookings per DAU ($0.00)		$	0.43			$	0.37				16	%		$	0.42			$	0.34				24	%
*as a single application with multiple games, active users equal unique users

 

 

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		Second Quarters												Six Months
Periods Ended March 31,		2014				2013				% Change				2014				2013				% Change
(In millions, unless otherwise noted)
Operating Expenses
Selling, general & administrative		$	124.1			$	110.7				12	%		$	242.1			$	210.9				15	%
Research & development			58.5				58.1				1	%			118.8				112.5				6	%
Depreciation & amortization			16.6				19.7				-16	%			33.2				38.7				-14	%
Contingent acquisition-related costs			3.7				21.9				-83	%			15.0				39.3				-62	%
Impairment and restructuring			17.8				1.6				*				17.8				1.6				*
Total operating expenses		$	220.7			$	212.0				4	%		$	426.9			$	403.0				6	%
Adjusted Operating Expenses
Total		$	188.0			$	180.1				4	%		$	377.4			$	349.3				8	%
Adjusted operating expenses is a non-GAAP financial measure. Reconciliations between GAAP and non-GAAP measures are provided at the end of this release.

 

 

		March 31,				September 30,
		2014				2013				% Change
(In millions, unless otherwise noted)
Cash and equivalents (including restricted amounts)		$	432.3			$	809.1				-47	%
Working capital			(27.2	)			267.5				-110	%
Contractual debt obligations			2,150.0				2,150.0				0	%

 

 

 

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

The company is reiterating its fiscal year 2014 revised guidance for adjusted earnings from continuing operations of $1.00 to $1.10 per share.

GAAP earnings per share from continuing operations for fiscal year 2014 will include acquisition-related expenses, primarily related to DoubleDown, severance costs, business realignment expenses, asset impairment charges, legal accrual charges, 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.

As previously announced on April 8, 2014, IGT will host a conference call to discuss its second quarter fiscal year 2014 earnings results on Tuesday, April 22, 2014, at 2:00 p.m. PDT. 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 through Tuesday, May 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 Tuesday, May 6, 2014.  The access numbers are as follows:

Domestic callers dial +1 866-566-0708

International callers dial +1 203-369-3622

Q2 FY 2014 Excel file

Q2 FY 2014 PDF of this press release

 

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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 leverage reduction initiatives; 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 2013 filed with the SEC on November 26, 2013 and our Quarterly Report on Form 10-Q for our quarter ended December 31, 2013 filed with the SEC on February 5, 2014 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 second quarter ended March 31, 2014, which we expect to file with the SEC in the second quarter of calendar 2014.  All information provided in this release is as of April 22, 2014, and IGT does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances.

IGT Resources:

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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

IGT Contacts:

Kate Pearlman

Vice President, Investor Relations and Treasury

+1 866-296-4232

InvestorRelations@IGT.com

 

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News Release

CONSOLIDATED STATEMENTS OF INCOME (Unaudited and Condensed)

		Second Quarters								Six Months
Periods Ended March 31,		2014				2013				2014				2013
(In millions, except per share amounts)
Revenues
Gaming operations		$	230.4			$	254.3			$	453.4			$	496.9
Product sales			202.6				279.0				446.2				513.7
Interactive			79.8				66.7				154.4				119.6
Total revenues			512.8				600.0				1,054.0				1,130.2
Costs and operating expenses
Cost of gaming operations			90.0				97.6				176.8				187.1
Cost of product sales			98.6				135.0				215.3				244.2
Cost of interactive			31.4				26.1				59.3				48.2
Selling, general and administrative			124.1				110.7				242.1				210.9
Research and development			58.5				58.1				118.8				112.5
Depreciation and amortization			16.6				19.7				33.2				38.7
Contingent acquisition-related costs			3.7				21.9				15.0				39.3
Impairment and restructuring			17.8				1.6				17.8				1.6
Total costs and operating expenses			440.7				470.7				878.3				882.5
Operating income			72.1				129.3				175.7				247.7
Other income (expense)
Interest income			10.7				11.1				20.9				22.4
Interest expense			(36.9	)			(30.3	)			(73.3	)			(62.0	)
Other			(3.4	)			(2.5	)			(5.3	)			(2.7	)
Total other income (expense)			(29.6	)			(21.7	)			(57.7	)			(42.3	)
Income before tax			42.5				107.6				118.0				205.4
Income tax provision			16.8				29.4				13.0				61.9
Net income		$	25.7			$	78.2			$	105.0			$	143.5
Basic earnings per share		$	0.10			$	0.30			$	0.42			$	0.54
Diluted earnings per share		$	0.10			$	0.29			$	0.42			$	0.54
Weighted average shares outstanding
Basic			247.7				263.6				250.2				264.7
Diluted			248.6				265.6				251.9				266.7

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News Release

CONSOLIDATED BALANCE SHEET (Unaudited and Condensed)

		March 31,				September 30,
		2014				2013
(In millions)
Assets
Current assets
Cash and equivalents		$	355.8			$	713.3
Investment securities			15.0				28.8
Restricted cash and investments			61.5				67.0
Jackpot annuity investments			55.0				56.5
Receivables, net			551.5				577.9
Inventories			76.0				90.1
Other assets and deferred costs			284.4				242.4
Total current assets			1,399.2				1,776.0
Property, plant and equipment, net			443.9				483.9
Jackpot annuity investments			253.3				268.6
Contracts and notes receivable, net			143.6				165.6
Goodwill and other intangibles, net			1,577.8				1,601.7
Other assets and deferred costs			483.7				317.0
Total Assets		$	4,301.5			$	4,612.8
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt		$	846.4			$	826.6
Accounts payable			92.9				110.0
Jackpot liabilities, current portion			121.9				131.7
Dividends payable			27.2				25.9
Other accrued liabilities			338.0				414.3
Total current liabilities			1,426.4				1,508.5
Long-term debt			1,357.1				1,366.3
Jackpot liabilities			278.5				293.3
Other liabilities			124.9				190.6
Total Liabilities			3,186.9				3,358.7
Total Equity			1,114.6				1,254.1
Total Liabilities and Shareholders' Equity		$	4,301.5			$	4,612.8

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News Release

CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited and Condensed)

Six Months Ended March 31,		2014				2013
(In millions)
Operating
Net income		$	105.0			$	143.5
Adjustments:
Depreciation and amortization			99.4				117.8
Acquisition-related contingent earn-out costs			6.6				16.2
Other non-cash items			64.8				54.7
Changes in operating assets and liabilities, excluding acquisitions:
Receivables			15.5				(21.1	)
Inventories			13.4				9.4
Accounts payable and accrued liabilities			(50.2	)			(78.0	)
Jackpot liabilities			(32.9	)			(40.7	)
Income taxes, net of employee stock plans			(50.4	)			(21.9	)
Other assets			(236.4	)			2.6
Net operating cash flows			(65.2	)			182.5
Investing
Capital expenditures			(46.2	)			(56.4	)
Investment securities, net			13.9				-
Jackpot annuity investments, net			25.0				27.1
Changes in restricted cash			5.6				5.8
Loans receivable payments received			14.9				15.1
Proceeds from assets sold			7.8				8.3
Net investing cash flows			21.0				(0.1	)
Financing
Debt-related proceeds (payments), net			(0.6	)			(20.0	)
Employee stock plan proceeds			12.0				8.3
Share repurchases, including net shares			(211.3	)			(75.1	)
Dividends paid			(53.4	)			(34.7	)
Acquisition-related contingent consideration			(56.1	)			(27.9	)
Net financing cash flows			(309.4	)			(149.4	)
Foreign exchange rates effect on cash and equivalents			(3.9	)			(2.8	)
Net change in cash and equivalents			(357.5	)			30.2
Beginning cash and equivalents			713.3				206.3
Ending cash and equivalents		$	355.8			$	236.5

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News Release

SUPPLEMENTAL DATA (Unaudited)

Revenue Metrics
		Second Quarters								Six Months
Periods Ended March 31,		2014				2013				2014				2013
In millions, unless otherwise noted
Gaming Operations
Revenues		$	230.4			$	254.3			$	453.4			$	496.9
North America			200.1				220.3				391.7				428.8
International			30.3				34.0				61.7				68.1
Gross margin			61	%			62	%			61	%			62	%
North America			58	%			60	%			59	%			61	%
International			78	%			69	%			75	%			69	%
Installed base (units '000)			53.4				56.7				53.4				56.7
North America			40.4				42.6				40.4				42.6
International			13.0				14.1				13.0				14.1
Yield (average revenue per unit per day - $0.00)		$	47.00			$	49.26			$	46.11			$	47.99
Product Sales
Revenues		$	202.6			$	279.0			$	446.2			$	513.7
North America			143.8				200.6				313.8				359.5
International			58.8				78.4				132.4				154.2
Machines		$	116.0			$	202.4			$	282.9			$	359.8
North America			79.1				148.7				197.2				250.5
International			36.9				53.7				85.7				109.3
Non-machine		$	86.6			$	76.6			$	163.3			$	153.9
North America			64.7				51.9				116.6				109.0
International			21.9				24.7				46.7				44.9
Gross margin			51	%			52	%			52	%			52	%
North America			56	%			53	%			54	%			54	%
International			40	%			49	%			46	%			48	%
Machine units recognized ('000)			7.9				14.3				20.7				25.0
North America			5.7				11.1				15.3				18.3
International			2.2				3.2				5.4				6.7
Machine units shipped ('000) [includes units where revenues deferred]			7.6				14.3				20.6				23.7
North America			5.5				11.1				15.3				18.0
New			2.1				2.7				5.8				4.4
Replacement			3.4				8.4				9.5				13.6
International			2.1				3.2				5.3				5.7
New			0.6				1.0				1.2				1.9
Replacement			1.5				2.2				4.1				3.8
Machine ASP ('000)		$	14.7			$	14.1			$	13.7			$	14.4
North America			13.9				13.4				12.9				13.7
International			16.6				16.6				15.9				16.3
Interactive
Revenues		$	79.8			$	66.7			$	154.4			$	119.6
North America			70.3				54.8				136.1				96.7
International			9.5				11.9				18.3				22.9
Social Gaming			68.8				54.3				133.6				95.6
North America			68.8				54.3				133.6				95.6
International			-				-				-				-
IGTi			11.0				12.4				20.8				24.0
North America			1.5				0.5				2.5				1.1
International			9.5				11.9				18.3				22.9
Gross margin			61	%			61	%			62	%			60	%
North America			62	%			61	%			62	%			61	%
International			51	%			58	%			58	%			54	%
DoubleDown average user statistics*
DAU (Daily active users) ('000)			1,775				1,690				1,745				1,575
MAU (Monthly active users) ('000)			6,218				6,276				6,208				5,596
Bookings per DAU ($0.00)		$	0.43			$	0.37			$	0.42			$	0.34
*as a single application with multiple games, active users equal unique users

 

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News Release

Reconciliations of GAAP to Non-GAAP Adjusted Financial Measures

		Cost of Interactive				Operating Expenses				Operating Income				Net Earnings (a)				Diluted EPS
Second Quarter Ended March 31, 2014
GAAP measures		$	31.4			$	220.7			$	72.1			$	25.7			$	0.10
% of revenue							43	%			14	%
Acquisition-related charges: (b)
Contingent retention & earn-out			-				(3.7	)			3.7				2.5				0.01
Amortization of intangibles			(2.7	)			(3.4	)			6.1				4.1				0.02
Business realignment			-				(16.5	)			16.5				11.0				0.05
Alabama note impairment			-				(1.3	)			1.3				0.9				-
Legal accrual			-				(7.8	)			7.8				5.2				0.02
Total non-GAAP adjustments			(2.7	)			(32.7	)			35.4				23.7				0.10
Adjusted measures		$	28.7			$	188.0			$	107.5			$	49.4			$	0.20
% of revenue							37	%			21	%
		(a) Adjustments tax effected at 33%; (b) Primarily DoubleDown

		Cost of Interactive				Operating Expenses				Operating Income				Net Earnings (a)				Diluted EPS
Second Quarter Ended March 31, 2013
GAAP measures		$	26.1			$	212.0			$	129.3			$	78.2			$	0.29
% of revenue							35	%			22	%
Acquisition-related charges: (b)
Contingent retention & earn-out			-				(21.9	)			21.9				14.6				0.06
Amortization of intangibles			(2.3	)			(4.5	)			6.8				4.5				0.02
Proxy Fees			-				(3.9	)			3.9				2.6				0.01
Alabama note Impairment			-				(1.6	)			1.6				1.1				-
Certain discrete tax items (benefits)			-				-				-				(5.9	)			(0.02	)
Total non-GAAP adjustments			(2.3	)			(31.9	)			34.2				16.9				0.07
Adjusted measures		$	23.8			$	180.1			$	163.5			$	95.1			$	0.36
% of revenue							30	%			27	%
		(a) Adjustments tax effected at 34%; (b) Primarily DoubleDown

 

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News Release

		Product Sales  Revenue				Cost of Gaming Operations				Cost of Interactive				Operating Expenses				Operating Income				Net Earnings (a)				Diluted EPS
Six Months Ended March 31, 2014
GAAP measures		$	446.2			$	176.8			$	59.3			$	426.9			$	175.7			$	105.0			$	0.42
% of revenue															41	%			17	%
Acquisition-related charges: (b)
Contingent retention & earn-out			-				-				-				(15.0	)			15.0				10.0				0.04
Amortization of intangibles			-				-				(5.4	)			(6.8	)			12.2				8.1				0.03
Business realignment			-				-				-				(16.5	)			16.5				11.0				0.05
Alabama note impairment			-				-				-				(1.3	)			1.3				0.9				-
Legal accrual			-				-				-				(7.8	)			7.8				5.2				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	)			(5.4	)			(49.5	)			55.5				7.4				0.03
Adjusted measures		$	446.2			$	176.2			$	53.9			$	377.4			$	231.2			$	112.4			$	0.45
% of revenue															36	%			22	%
		(a) Adjustments tax effected at 33%; (b) Primarily DoubleDown

		Product Sales  Revenue				Cost of Gaming Operations				Cost of Interactive				Operating Expenses				Operating Income				Net Earnings (a)				Diluted EPS
Six Months Ended March 31, 2013
GAAP measures		$	513.7			$	187.1			$	48.2			$	403.0			$	247.7			$	143.5			$	0.54
% of revenue															36	%			22	%
Acquisition-related charges: (b)
Contingent retention & earn-out			-				-				-				(39.3	)			39.3				26.2				0.10
Amortization of intangibles			-				-				(4.6	)			(8.9	)			13.5				9.0				0.03
Proxy Fees			-				-				-				(3.9	)			3.9				2.6				0.01
Alabama note impairment			-				-				-				(1.6	)			1.6				1.1				-
Royalty settlement			(5.0	)			-				-				-				(5.0	)			(5.0	)			(0.02	)
Certain discrete tax items (benefits)			-				-				-				-				-				(5.9	)			(0.02	)
Total non-GAAP adjustments			(5.0	)			-				(4.6	)			(53.7	)			53.3				28.0				0.10
Adjusted measures		$	508.7			$	187.1			$	43.6			$	349.3			$	301.0			$	171.5			$	0.64
% of revenue															31	%			27	%
		(a) Adjustments tax effected at 34%, except no tax effect on royalty settlement; (b) Primarily DoubleDown