Quarterly revenue jumps at IGT

Tuesday, Nov. 2, 2004 | 10:59 a.m.

International Game Technology, buoyed by a 14 percent increase in revenue for its fourth quarter, closed its fiscal year with record results, the company announced today.

Reno-based IGT, the world's largest slot machine manufacturer, reported revenue of $621.7 million for the quarter, the second highest ever for a fourth quarter for the company, and up from the $547.5 million reported for the same period a year ago.

Net income and earnings for the quarter were offset by a one-time adjustment resulting from the company's early redemption of senior notes in July. As a result, the company posted net income of $54.3 million, or 15 cents a share, compared with the 2003 quarter's $108.3 million, or 31 cents a share.

The company said the adjustment reduced income by $77 million, or 21 cents a share . A survey of 19 analysts by Thomson Financial had projected earnings of 33 cents a share for the quarter.

In a conference call this morning, IGT executives attributed the strong showing to the continued geographic diversification of the market.

"We had a record year at IGT in every significant measure of our business," said T.J. Matthews, the company's chief executive. "By adapting IGT technology, we gained access to new markets in New York, Alabama and Oklahoma, further expanding our geographic reach. The diversity of the IGT product line and the breadth of the markets we serve allows us to generate consistently strong earnings and cash flow."

Wall Street was impressed with the report.

Marc Falcone, a gaming analyst with Deutsche Bank, said in a report issued today that IGT's gaming operation system installations exceeded expectations.

"At quarter end, IGT's gaming ops installed base reached 37,200, versus our expectations of 36,800," Falcone said. "We think this is a particularly strong number, given increased competition from both Aristocrat and WMS (Gaming)."

The market also responded favorably, with shares up $1.85, 5.6 percent, to $34.94 in early trading.

Executives commented during their conference call that they are keeping a close watch on today's general election, optimistic that a positive outcome of a gaming initiative in Oklahoma could result in accelerated sales potential there next year.

While the company and most of the industry have written off the possibility of approval of two initiatives in California in today's vote, Matthews said the likely defeat of Propositions 68 and 70 in California would enable the state to rededicate the compact process.

Matthews noted that Gov. Arnold Schwarzenegger already has negotiated 10 new gaming compacts with Indian tribes, nine of which have been approved by the California Legislature and five by the U.S. Department of the Interior.

He said a rededication to the compacting process would enable new and expansion slot units in the state by the second half of next year.

Maureen Mullarkey, IGT's chief financial officer, said slot sales to tribal operations accounted for 2,600 of the company's 32,500 shipments for the quarter.

The company also shipped 3,800 units to Nevada casinos, 2,200 to Atlantic City and 2,400 to riverboats and other Midwest outlets.

Matthews also said the company is encouraged with expansion on the international front. He said IGT has 50 employees based in Reno dedicated to developing games that resonate with customers in different countries.

The company is encouraged by the strong showing of U.S.-based casino companies in Macau and by this week's advancement of legislation in Great Britain to expand the scope of casino gaming in that country. IGT also has smaller international initiatives geared for Japan and Russia.

Executives also briefly mentioned in this morning's call that IGT's Las Vegas campus project is on track and that its development would represent about half of the company's capital outlay next year.

The company announced in August that it would consolidate its Southern Nevada operation under one roof with a 600,000-square-foot building on the northwest corner of Buffalo Road and Sunset Drive in southwest Las Vegas.

The new facility, which will consolidate operations in nine buildings scattered throughout Southern Nevada, is expected to be completed by October 2006 with groundbreaking planned this month.

The company has said it has no plans to expand its Las Vegas workforce, which stands at about 750, and there are no plans to move any of the company's major manufacturing operation from Reno.