Earnings stagnant for IGT despite California boost

Thursday, July 20, 2000 | 11:20 a.m.

Investor reaction

The stock of International Game Technology fell 44 cents to $27.56 this morning. The slot maker earned 51 cents per share in its third quarter, beating analyst expectations of 47 cents per share. But it said fewer casino openings are lowering sales, except in California.

Boyd Gaming stock fell 25 cents this morning to $4.81. The company reported quarterly earnings of 11 cents per share, well below analyst expectations of 18 cents.

Harrah's Entertainment was up $1.19 this morning to $23.19. It reported lower earnings Wednesday and the stock fell 81 cents Wednesday

Aztar Corp., owner of the Tropicana resorts, traded today at $15.75, up 56 cents. It reported higher earnings Wednesday.

Casino Data Systems was off 50 cents to $6.25 this morning.

International Game Technology of Reno today reported a third quarter profit of $37.6 million or 51 cents per share, about even with the $37.5 million or 39 cents earned in the year-ago quarter.

IGT said sales of slot machines at expanding California Indian casinos failed to make up for a decline in sales caused by a lack of casino openings in recent months in big U.S. markets like Las Vegas and Atlantic City.

The Aladdin hotel-casino opens Aug. 17 on the Las Vegas Strip -- marking the first major casino opening in Las Vegas since September 1999. It will likely be a few years before Las Vegas experiences another round of big resort openings, leaving IGT and other slot makers to focus on sales of replacement slot machines in the city rather than sales to new properties.

An IGT share repurchase program drove the increase in earnings per share. Revenue of $263.7 million in the quarter ended July 1 was up from $258.9 million.

Quarter and year-to-date sales of gaming devices totaled 32,000 and 74,300 units compared to 33,700 and 91,600 units in the fiscal 1999 period.

Despite the decline in quarterly unit sales, IGT said it benefited from expanded Indian gambling in California.

IGT sales to California tribal casinos totaled 1,900 machines for 64 percent of the market.

"It's exciting to see the startup of the new-style casinos in California," said Tom Baker, president and COO of IGT. "IGT and (subsidiary) Sodak have worked hard to establish and renew relationships and prepare for this new beginning. We still face a large installed base of existing games and it may take some time for us to expand our market share, but California represents a land of opportunity and our initial response has been very favorable."

Revenues from gaming operations reached $96.9 million in the quarter, up from $91.3 million in the year-ago quarter.

The installed base of IGT MegaJackpot machines including joint venture units totaled 17,600 at quarter end compared to 14,600 one year earlier.

"We also began operation of our first Native American MegaJackpot games in the California market. In July, we awarded our first MegaJackpot of approximately $250,000 on a Quartermania machine at the Barona Casino," Baker said.

At Casino Data Systems, the Las Vegas company posted record quarterly operating income in the second quarter of $4.4 million vs. $2.4 million in the year-ago quarter. Earnings totaled $3.1 million or 17 cents per share vs. $1.9 million or 11 cents one year earlier. Revenue fell from $22.8 million to $20.2 million.

Casino Data attributed the gain in operating income primarily to design and manufacturing efficiencies in its games division.

Chairman and Chief Executive Steve Weiss said the company's financial position is robust, that it leads in market share in casino management systems and that "we are off to a strong start in the newest market, California, and are excited about our prospects there."

And Boyd Gaming Corp. of Las Vegas reported second-quarter earnings, before preopening expenses, of 13 cents per share, down from 16 cents in the prior-year quarter.

Preopening expenses in the quarter of $2 million, or 2 cents per share reduced earnings to $6.7 million or 11 cents per share, down from $9.7 million.

Boyd reported earnings declines principally at three properties: Sam's Town Las Vegas and Sam's Town Tunica, Miss., both of which were hurt by construction disruptions; and Treasure Chest in New Orleans, which suffered from competition from Harrah's in that city.

Despite the declines, Boyd reported record earnings from its downtown Las Vegas properties, where operating cash flow rose 20 percent to $11.5 million from the prior year.

Revenues for the quarter were $270 million, up 11.5 percent.

"I am pleased with the second quarter results at many of our properties, particularly those in downtown Las Vegas where overall results reached record levels. It is unfortunate that the company's bottom line in the quarter was affected to a large extent by renovation projects at our two Sam's Town properties," said Chairman and Chief Executive William Boyd. "However, we believe these projects will strengthen the competitive positions of these properties and benefit our performance after their completion at the end of this year."

Boyd's landmark Stardust hotel-casino on the Las Vegas Strip reported second quarter revenue of $37.8 million -- up $2.1 million, or 5.7 percent, from last year. Guest room occupancy increased 6 percentage points to 96 percent. But operating cash flow for the property of $4 million was nearly even with last year due to higher marketing and showroom expenses.

Sam's Town Las Vegas reported a revenue decline of $6.2 million, or 15.9 percent, in the quarter. Hotel occupancy was 91 percent, down 7.1 percentage points from last year.