IGT beats expectations for second quarter

Tuesday, April 23, 2002 | 11:03 a.m.

International Game Technology, the world's largest maker of slot machines, reported higher earnings in its second quarter today, surpassing analysts' expectation and enthusing Wall Street investors.

The Reno-based company reported earnings of $73.9 million, 81 cents a share, on revenue of $530.4 million for the quarter compared with $53.6 million or 70 cents a share on revenue of $312.7 million for the same period a year earlier.

A survey of 14 analysts by Thomson Financial/First Call projected earnings of 79 cents a share for the quarter. IGT's stock was up $4.31 a share to $58.48 in morning trading today.

Jason Ader, gaming analyst with Bear Stearns, said Wall Street is reacting to IGT's progress in the development of participation games.

"The main item that Wall Street was focused on was the installed base of participation games," Ader said. "We were expecting that the participation base would be down, but it was actually better than we thought it would be."

Ader said IGT reported that its installed base grew by 400 units in non-Nevada markets, offsetting declines that occurred when Station Casinos Inc. and Harrah's Entertainment reported pulling out several hundred participation games.

With participation games -- like IGT's American Bandstand, Sinatra, Bewitched and Price Is Right slots -- the company shares revenues with the casinos in which they are installed.

The company's earnings were up despite the company shipping fewer units in the quarter as its gross profit margin improved 4 points to 43 percent. The results also include a one-time charge of $1 million for the company's merger with Anchor Gaming, completed Dec. 30, and $1.5 million in bad debt reserve.

In the quarter, IGT shipped 29,500 units compared with 30,400 in the same period a year earlier. Replacement units drove growth for the company in the domestic market, with 12,000 sales compared with 8,700 in the second quarter of 2001. The company said strong demand for cashless slots stimulated demand.

The company said it also experienced additional replacement volume in North American government-operated public gaming markets in Canada, Oregon and West Virginia.

IGT shipped 3,800 new units to U.S. and Canadian public gaming markets in the quarter compared with 800 in the prior-year period. The company said sales in various markets helped offset lower demand in Indian casinos, where volumes were lower due to the maturation of the California market, and in Nevada, which had lower casino capital expenditures following the Sept. 11 terrorist attacks.