Reno-based IGT reports sharply lower 4Q profits

Associated Press

Thursday, Oct. 30, 2008 | 8:39 a.m.

International Game Technology, the world's largest maker of slot machines and casino game systems, reported Thursday that its fourth-quarter profit fell by more than half as the weak economy hurt its customers.

The company said it earned $52.1 million, or 18 cents per share, down from $122.6 million, or 38 cents per share, during the same period last year. Revenue fell 4.6 percent, to $632.2 million, from $662.9 million a year ago.

Results included a non-cash charge of $28.6 million or 10 cents per share, for writing down investments.

Analysts polled by Thomson Reuters, who generally exclude such items, were expecting a profit of 31 cents per share on revenue of $626.7 million.

For the fiscal year, income fell to $1.10 per share on revenue of $342.5 million, down from $1.51 on $508.2 in revenue in 2007.

"Our fiscal 2008 results reflect challenging economic operating conditions affecting our customers and in turn our business," TJ Matthews, IGT chairman and chief executive officer, said in a statement.

IGT shares rose 17 cents, or 1.4 percent, to $12.74 in early trading Thursday. Shares have ranged from $49.41 to $9.76 over the past year.

Product sales fell 2.7 percent to $301.2 million. Domestic shipments increased because of a new gambling machine model. A decrease in shipments to Japan was partially offset by increased shipments to Latin America.

During the quarter, IGT said it shipped 8,900 machines domestically and 11,200 to international markets.

Operating expenses rose 14.1 percent to $204.4 million on higher legal and compliance fees and staffing costs, the company said.

IGT officials said the company would focus on reducing costs to weather the economic downturn. In September, the company offered voluntary buyouts to about 500 workers and said it planned an unspecified number of layoffs. The company, based in Reno, has about 5,400 employees worldwide.

"We had a tough 2008," Matthews said in a conference call with analysts.

"We also know that we've been challenged by things that are beyond our control, the consumer and the operator, and that those issues still have yet to play themselves out," Matthews said.

"That said, we feel very comfortable that 2009 will be a year in which we return to growing the earnings per share of this company, return to growing revenues, and in fact feel very optimistic about the product outlook of our company."

In years past, IGT's growth was propelled by casinos replacing outdated coin machines with ones using cashless, ticket technology.

The company remains optimistic that widespread introduction of a new generation of server-based casino games and management systems will fuel a new replacement demand.

Analysts agree.

"Despite the last of near to medium-term catalysts to drive earnings acceleration, we believe the long-term story remains intact for IGT," Robin Farley of UBS said in a note to investors.

"The industry is moving closer to the introduction of server-based technology at the end of 2009, and we believe this technology-driven replacement cycle will begin to accelerate into 2010, even with potentially disappointing (earnings per share) in the near-term quarters."

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On the Net:

International Game Technology: http://www.igt.com