IGT sees more success on heels of record year

Scott Sonner

Wednesday, March 3, 2004 | 9:14 a.m.

RENO -- Shareholders celebrated another record year of sales and profits at International Game Technology on Tuesday, and the world's largest slot machine maker predicted more to come.

"The year that just ended was a momentous occasion. A lot of records were broken," IGT Chairman Tom Baker told about 300 shareholders at the company's annual meeting.

Reno-based IGT surpassed $1 billion in revenue for the first time last year, up 26 percent from 2002, with record gross profits of $571 million, 12 percent more than the year before.

"We have the strongest balance sheet in the gaming industry," said T.J. Matthews, president and chief executive officer of IGT, which commands 70 percent of the market worldwide.

IGT looks for new business this year at combination race track-casinos in New York state and expanding tribal casinos in California and Arizona as well as future growth overseas in Japan and potentially in the United Kingdom, Matthews said.

One of the keys to success will be continued emphasis on research and development of new slot games, Matthews said.

The $95 million IGT spent on R&D last year will increase to $120 million this year, he said.

"That is substantially more than all of our competitors -- almost as much as all of them combined," Matthews said.

"While they are spending money in redundant fashion, we are pushing ahead," he said.

"We produce the best games by everyone's standards, especially the paying public. They vote with their money and at the end of the day there is more money in IGT slot cash boxes than any other machines," he said.

Jean and Bob Nelson of East Wenatchee, Wash., two new IGT stockholders attending their first annual meeting, will attest to that. They were playing slot machines in Las Vegas last summer when Bob Nelson noticed "almost all of the machines had IGT on them," Jean Nelson said.

"He asked me, 'What's IGT?' And I said that I don't really know. So when we got home he got on the Internet and looked it up and decided he wanted some of that stock," Jean Nelson said.

"It's been all good news for us so far," she said.

IGT's board of directors declared a quarterly cash dividend of 10 cents per share on Tuesday payable March 30 for shareholders of record on March 16.

Last summer, IGT announced a cash dividend of 7.5 cents per share as well as four-for-one stock split. The stock closed Tuesday at $42.60 on the New York Stock Exchange, up $1.06.

"Generally the friendliness of shareholders is directly related to how the stock has done," Baker joked.

IGT sold a total of 135,000 slot machines in the 2003 fiscal year that ended Sept. 30, up from 124,000 the year before. About 58,000 of those replaced existing machines.

"We're confident we'll meet our goal of 60,000 to 65,000 in replacement sales this year," Matthews said, the vast majority new cashless slots that use ticket vouchers.

New games in the pipeline include those with themes based on old television shows, "That Girl," "MASH," and "The Beverly Hillbillies," as well as the cartoon character "Dilbert," comedian Rodney Dangerfield and a new version of the widely popular "Wheel of Fortune," he said.

Responding to questions from shareholders, Baker said he's not worried about potential competition from online gambling.

"We dabbled in it a few years ago (in Australia) and pulled out because of some regulatory concerns," he said.

"My assessment in looking at the numbers is nobody can really make money in that business without the U.S. market," he said.

"I don't see any indication there will be any (federal) legislation to approve online gaming."