This summary is based on the fourth quarter fiscal 2007 earnings call conducted by International Game Technology (IGT) on November 1, 2007.
Management:
Vice President of Investor Relations: Pat Cavanaugh
Chairman and Chief Executive Officer: T.J. Matthews
Chief Accounting Officer and Treasurer: Danny Siciliano
Key Investors Issues
- EPS were 38 cents a share compared to 33 cents a share last year.
- Earnings rose to $122.6 million from a year-ago $114.9 million.
- Revenue increased to $353.3 million from $333.8 million in the year-earlier period.
Second Quarter Highlights
Product sales revenue totaled $310 million.
- Revenues were up 2% from last year.
- Worldwide, the company shipped 23,400 machines, which compares to prior shipments of 22,400.
- Non-machine revenues comprised of gaming systems, game theme conversions and parts in intellectual property fees, totaled $118 million, or 38% of total product sales.
- Non-machine revenues carry higher margins than machine sales and the company expects them to continue to trend at approximately 30% for the year.
- The mix of non-machine revenues was mostly offset by the greater mix of international low payout machine sales during the year. Product sales gross margins were 52%.
Domestic product sales revenue totaled $186 million on volume of 8,300 units compared to $209 million and 11,700 units in the prior year.
- Domestic non-machine revenues totaled $87 million, up 15% from the prior quarter.
- The quarter was up due to strong system sales partially offset by lower parts sales.
- Domestic replacement shipments totaled 4,500 units.
- Improvement was driven by an increase in the share of ABP sales and stronger domestic non-machine sales.
- International product sales revenue totaled $124 million on volume of 15,100 units compared to $96 million and 10,700 units in the prior year.
Total operating expenses were $179 million.
- Pre-tax items affecting comparability include an $11.3 million charged R&D for the buyout of a third-party development contact realized in the fourth quarter of the previous year, a $12 million insurance settlement related to the gulf coast hurricanes received in the second quarter of fiscal 2007, a $5.8 million gain on the sale of a corporate asset realized in the second quarter of fiscal 2007.
- Excluding these items, higher expenses were the result of increased staffing costs to support business growth, higher legal and compliances, and more investments in innovative gaming technology. SG&A expense inclusive of bad debt totaled $105 million.
- R&D expense totaled $54 million.
Depreciation and amortization within operating expenses totaled $20 million.
- Total depreciation and amortization inclusive of depreciation on game ops machines was $67 million. Compared to the prior year quarter, total depreciation and amortization increased 9%.
- Other income and expense net was an expensive $2 million compared to income of $11 million last year.
- The change in other income expense is primarily related to additional interest expense associated with new 2.6% convertible bonds that were issued in December of 2006 and additional borrowings on line of credit partially offset by higher interest income.
- Cash equivalence and short-term investment inclusive of six months totaled $401 million at September 30, 2007, compared to $589 million at September 30, 2006.
- Debt totaled $1.5 billion at September 30, 2007, compared to $832 million last year.
- The reduction in cash levels and increasing debt are directly related to company''s share repurchase efforts.
The company has 33.2 million shares remaining under the share repurchase authorization.
- The company continues to expect this authorization to be exhausted by the end of March 2010.
- Working capital totaled $596 million compared to $129 million at the end of the prior year with average day sales up withstanding of 79 days and inventory turns at 4.2 times.
- The change in working capital was the result of refinancing convertible to ventures in the second quarter that were previously classified as current liabilities at the end of last year.
- IGT generated $822 million in cash from operations, up 32% from the prior year.
- Capital expenditures totaled $344 million compared to $311 million last year.
